The Covid-19 pandemic is fuelling an e-commerce boom as shuttered businesses move online — but Google isn’t benefiting in way its big tech rivals are.
Google advertising sales fell 8% in second quarter, causing overall revenue at parent Alphabet Inc. to shrink for first time. The company’s main digital ad rival Facebook Inc. saw sales jump 11%, while Amazon.com Inc. revenue soared 40%.
Those gaps highlighted how Google struggled to parlay its online search dominance into a meaningful e-commerce business. While Google runs the world’s largest search engine, US consumers are more likely to look for things to buy on Amazon. Facebook’s Instagram has focused heavily on online shopping, and Facebook itself recent unveiled a big e-commerce initiative. Meanwhile, Google’s ad business has been hurt by exposure to travel industry and brick and mortar retailers, which have been devastated by pandemic.
Google was asked about this disparity during a conference call. “We’ve gone through this pandemic where there is a real inflection point. We see it in Amazon’s results,” Mark Mahaney, an analyst at RBC Capital Markets, said. “I’m not sure I see it in Google’s results.”
The internet giant is aware of the problem. Chief Executive Officer Sundar Pichai spoke repeatedly about the company’s e-commerce initiatives.
He highlighted more investment in a Buy on Google feature that lets people purchase products directly through search results without having to go to a retailer’s website.
The CEO also touted Smart Shopping campaigns, a type of ad that lets merchants upload their products, set a marketing budget and then leaves Google’s artificial intelligence software to decide when and where to place ads around the web. The process is meant to make advertising easier for smaller sellers.
The company’s YouTube unit is also pushing more ads and features that let people buy directly from the video site.
Google is trying to make direct commerce a bigger part of its business in other ways, too. In recent months, it has opened up its Google Shopping marketplace to more merchants, dropped transaction fees and let any seller upload product listings for free. Before this, Google Shopping was mostly an advertising operation that required retailers to pay when consumers clicked on product ads.
“Users come to Google a lot to find the products they are looking for,” Pichai said. “Sometimes, the journeys may fail because they don’t find what they’re looking for, so we want to make sure it’s comprehensive.”