Amazon: First Bookstores, Then Retail Stores, Now Google?

Amazon: First Bookstores, Then Retail Stores, Now Google?
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When Amazon launched as an online bookstore, probably few envisioned what it might become one day. First the company took out brick-and-mortar bookstores, and then it began targeting other types of stores with other products. But there seems to be no end to Amazon’s ambitions, as now analysts are starting to look at how it could threaten Google and where else it could go from here. As usually seems to be the case with the retailer, it’s about Prime.

Amazon taking over in search?

Google was once known for its ambitious projects, like the self-driving car it was testing long before autonomous driving became the huge opportunity most see today. However, most of those moonshot projects haven’t really gone anywhere, unlike Amazon, which has continued to scale the mountain of success while branching into new areas.

Search is one area in which Google has been the dominant force with no one able to oppose it, but might Amazon be able to take a bite out of this business too? Wedbush analyst James Dix spoke with Kantar Retail representatives recently to discuss Amazon as a competitor for Google. Notably, Dix is the analyst who downgraded Google parent Alphabet in September for not being innovative enough.

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A shift from search to Amazon Prime

Dix said in a research note dated March 13 that Amazon Prime is the main driver of the shift for product searches aware from search engines and toward specific e-commerce sites, according to Kantar. Prime has penetrated 37% of households in the U.S. with 55% of the purchasing power, and Prime subscribers are much more likely to use Amazon to search for products than type product-related searches into Google or another search engine.

What’s even worse for Google is that Amazon has moved into Product Listing Ads, and while this is just recent, Dix believes it’s part of the retailer’s wider strategy to push use of its website even further among Prime members. He adds that Google’s push toward mobile monetization also threatens the retailer’s organic search traffic. Kantar believes the retailer is trying to boost member use of Prime, especially in categories in which it believes Prime isn’t getting enough of a market share in indexing.

Search moves to artificial intelligence

Amazon’s Alexa digital assistant has also been growing in popularity, even beyond its Echo speaker product. Although this is also something that’s in the early days, Dix calls Alexa “a siren song for search.” He adds that about half of mobile searches are being done via voice, and Google dominates here. Kantar Retail told him that it’s still too early to really know how digital assistants are going to fare in terms of the search and shopping process.

They do help with basic tasks like cooking and home repair, but the ability to speed up the progress from search to purchase is unproven. Further, Alexa’s mobile penetration is still low and thus will likely reduce its impact on search.

Shares of Amazon stock edged higher by as much as 0.24% to $854.50, while Alphabet stock rose by as much as 0.46% to $865.26 during regular trading hours on Monday.

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