What is worse – to forgo the chance of earning $1,000,000 or to earn $1,000,000 knowing that you have to pay half of it to your strongest competitor? Amazon CEO Jeff Bezos decided that, no matter how many millions they could earn with it, Amazon won’t buy Google product ads.
Amazon & Google – from “friends” to rivals
Once upon a time, Google and Amazon were mutually making their race – each to become the world’s biggest player in their area of business. Google was Amazon’s main resource to deliver customers and Amazon was Google’s number one source of income.
But in Google’s world, there is no such thing as a gentleman agreement. Time after time, they tried hard to enter the retail branch. Just think of its effort to establish Boutiques.com in 2010, which flopped and was merged into Google Product Search.
Amazon, on the other side, was called the “sleeping giant of the advertising world” because, despite of its huge customers’ data insights, it showed no big ambitions to get a foot into the marketing world. This dramatically changed with the announcement of the Amazon Advertising Platform (AAP) in October 2012.
“For the last couple years we have been very focused on building a global scalable ad business and figuring out what it takes to create a great customer experience. We just didn’t feel ready and now we do”, Amazon’s global head of advertising, Lisa Utzschneider, stated in an interview with Ad Age shortly after its official announcement.
For Google, this announcement must have sounded almost like a declaration of war. What once had started as a strategic win-win relation had later become a respectful rivalry of two super powers and then ended up in open battle.
The battle to become the no. 1 search engine for product searches
“Google and Amazon both have the same end goal, to be the destination that people go to to do their product searches, and Amazon’s winning that battle,” market insider Michael Griffin told The New York Times in 2012.
But today, two years later, it is Google who won the first battle. Google’s Product Listing Ads and the switch to a paid shopping platform (Google Shopping) were a huge success story since their worldwide rollout in 2012 and 2013.
With this move, Google killed several birds with one stone:
- Both data relevance and user-friendliness for retail product searches with Google have increased a lot – and therefore Google could gain market share.
- Organic search results have lost relevance compared to the straight-forward PLAs that include product images and prices. For Amazon this is a slap in the face as they rank on top positions for most retail searches.
- With Amazon Marketplace, Amazon earns a commission with every sale, but Google gets paid by click. And it is a lot easier and less committal for a retailer to set up a Google Shopping Campaign than to sell products at Amazon Marketplace.
No wonder, that Amazon doesn’t want to play along and buy Google Product Listing Ads – and pay for customers they had for free before Google started PLA.
Amazon strikes back: Product Ads á la Amazon
Instead, Amazon decided to offer product ads themselves. They had already been doing this for several years, but only within the U.S. market and on a very low scale. Now they decided to get more money out of pay-per-click product ads on their own website and increased its effort to promote Amazon Product Ads. The program was rolled out in other countries (Great Britain, Germany and France) and product ads are now displayed on more prominent spots on the Amazon site than ever before.
- Screenshot 1: Amazon Product Ads prominently displayed in the offer listings page together with Marketplace listings
- Screenshot 2: When a product is not available within the Amazon Marketplace, Amazon Product Ads with external links even show up as search results
What do you think, did Amazon make a rational choice to boycott Google PLAs – or are they just losing a lot of money fighting a war they cannot win?
- Google’s Competition Is Amazon, Not Apple (George Baroudi on InformationWeek)
- Google Shopping Beats Amazon Product Ads on Costs, Traffic, Not Conversion Rate [Study] (Mary Weinstein on Search Engine Watch)