Google takes yet another run at e-commerce and Amazon

GOOGLE executive Prabhakar Raghavan recently had an issue with his rose bushes. His wife took a photo of the plants on her phone, uploaded the image to Google, identified the culprit and followed a link for a fungicide. Then she bought it.

A seamless transaction that didn’t involve typing into a search bar, it was a real-life test of sorts for Raghavan’s strategic vision. A senior vice president responsible for most of Google’s largest services—search, maps, advertising and more—the 61-year-old executive is determined to crack e-commerce, a market projected to hit US$2.27 trillion in 2025 that the Alphabet Inc division has tried and failed to figure out many times before.

In the past, Google has tried emulating Amazon.com’s online retail and delivery services, with little luck. Now, under Raghavan, the search giant is positioning itself as a kind of anti-Amazon, a free marketplace for merchants and Amazon rivals that’s designed to get consumers more comfortable shopping with Google. 

Last week, at Google’s I/O software conference, Raghavan and his deputies demonstrated new features they hope will achieve that end, including one that lets visitors use photos to search for nearby retail products or find any item in the physical world with the click of a camera.

And on Tuesday, the company unveiled a feature that lets people go from merchant listings on Google search to their checkout pages in one click. Raghavan hopes the various initiatives will persuade millions of people to click buy, prompting sellers to purchase many more Google ads. 

For Amazon, which built a booming business by essentially renting its digital real estate to small sellers, the risk is that Google could give those brands a pathway to thriving outside its marketplace. That in turn could force the Seattle-based company to more aggressively court sellers with discounts on fees, advertising or logistics services.

Still, Amazon remains a formidable rival, and Google confronts daunting challenges. Its renewed push into e-commerce coincides with a slowdown in online shopping as consumers revert to their pre-pandemic habits. Amazon and EBay both recently reported slowing growth and weak profit outlooks. Moreover, Google has always sought to make its technology fade into the background. Turning the site into a shopping destination risks wrecking the experience and alienating visitors.

Ahead of the I/O presentation, Raghavan took pains to say shopping on Google would be “super smooth.” If the concept works as advertised, he said, shoppers won’t have to think: “‘Am I doing a search? Am I on Amazon or Google?’”

While Google’s advertising operation continues to print money, the model is under siege from regulators and privacy clampdowns, including Apple’s ban on targeted marketing messages. Due in part to these headwinds, the growth rate of the ad business is destined to slow, and Google isn’t the only one jumping into e-commerce to goose revenue; Meta Platforms and TikTok are as well.

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Meanwhile, even as Google tries to build an online shopping destination to complement its ad business, Amazon has done the inverse: created a robust advertising operation on top of its enormous online bazaar. Google’s success is hard to gauge because it doesn’t break out e-commerce sales or retail ads. Amazon’s is easy to see; its ads business posted 23% growth in the first quarter. “That seems to be working way better for Amazon than it is for Google,” said Mike Ryan, a portfolio strategist for Smarter Ecommerce GmbH. 

Raghavan has tied Google’s main revenue and profit drivers—search and ads—more tightly to its e-commerce efforts than ever before. That’s all put more pressure on him to deliver on his strategy. BLOOMBERG