Here’s How Google Is Increasing Its Focus On E commerce

Reports suggest that Alphabet Inc.’s subsidiary Google (NASDAQ:GOOG) will now allow product ads in image search results and these ads will include a link to buy the product being searched. This move is aimed at encouraging buyers to use Google as their first option to find a suitable product, rather than any other popular e-commerce website such as Amazon. With an increasing number of consumers using their mobile devices for online transactions, the popularity of e-commerce apps is on the rise. Consumers are now bypassing Google search and looking for products directly on e-commerce apps. Google is looking at ways to bring users back to its platform and an ad-on-image search that provides an option to buy the product should be tempting for users. Google is also expanding ads for local retailers, which will allow consumers to not only make purchases for in-store pickup, but to check inventory status as well. We believe that, in the era of e-commerce apps, these initiatives will help Google maintain penetration and attract traffic on its platform.

Click here to see our complete analysis of Google

Initiatives To Attract More Product Searches On Its Platform

Google aims to increase its capability as an online retailing platform increasing its focus on local retailers and providing online shoppers with useful data such as stock inventory in nearby stores. Consumers are increasingly using their mobile phones to connect with the physical world and the online to offline market is growing, even inemerging markets.  The O2O (i.e., Online-to-Offline) market is estimated at $ 64 billion in India, while HSBC estimates that the Chinese O2O market is close to $ 156 billion with an internet penetration of just 4%.  Google is well poised to capture a share in this market through its focus on local retailers and providing detailed information to buyers around product availability in local shops. The company can also attract more local advertisers once it proves that its platform is the best source of a consumer’s purchase intent.

According to our estimates, search advertising is the most valuable segment for Google with nearly 50% of its valuation to come from mobile and PC search ads.  We expect Google’s mobile search market share to remain steady around 85% during our forecast period.

However, Google is losing a sliver of its search business to Amazon and its move to include product ads on image searches appears to be aimed at attracting this lost traffic. A study of online shopping habits of 2,000 consumers conducted in the U.S. by BloomReach Inc. revealed that 44% of  shoppers begin their product searches on Amazon while 34% start their search on a search engine. This is being partially attributed to the shift of searches from desktop to mobile devices and Amazon’s superlative search and discovery mobile platform.With more than 54 million subscribers covering nearly half of U.S. households, Amazon’s Prime membership is growing significantly. These members would prefer to search for a product on its app instead of opting for Google. Google is now looking at ways to bring this traffic back to its platform and stay relevant in the product search space. The latest initiative to include mobile friendly product ads on image searches is aimed towards this goal.

We believe Google’s initiatives to attract more product search traffic to its platform should yield results in the long term. As consumers see various purchase links and compare prices of the product between various sellers, they should be attracted towards Google’s platform. The battle between Google and Amazon to attract more product searches is on and Google is definitely innovating its way to be a strong competitor to Amazon.

Understand How a Company’s Products Impact its Stock Price at Trefis

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research