Mobile Fix: Amazon threatens Google

In his latest Mobile Fix, Simon Andrews, founder of Addictive!, looks at the growing battle between Google and Amazon as they go head to head – despite such different business models – in both advertising and delivery.

discusses why Amazon can treat advertising in a different way to Google, why the internet giant is a dangerous competitor to anyone with a more traditional affection for ROI, and just what it is that makes mobile shopping list tools and coupons so attractive to brands.

With revenues of $38billion, Google is now thought to be the biggest media owner in the world. The competition is likely to come from other GAFA players with Facebook growing very quickly – especially in mobile – but they are a long way behind.

Amazon is also a growing threat – as its unique insight into people’s buying habits theoretically allows for very granular targeting.

New forecasts suggest that Amazon will take $835 million in ad revenue this year – up from just $400 million in 2011.

This shouldn’t cause too many sleepless nights at Google HQ, but the very different business models do suggest Amazon can trouble Google in the future.

Because Amazon profit from the actual sales of goods, it can treat the advertising in a different way to Google – and as it could close the loop between advertising and actual sales, it could be an attractive alternative for brands struggling with attribution.

Of course, Google hopes its wallet will one day give it similar data on actual sales.

We see the Tesco investment in media as part of a similar strategy. Persuading brands to allocate marketing funds to Tesco TV as part of the deal for distribution could be attractive to both sides.

But we know that many (most?) CPG companies fear retailers getting more control over what brands do to promote their products. The biggest expenditure of many CPG brands isn’t media spend as is often believed – it’s the funds they give to Tesco, Walmart, Carrefour etc to fund BOGOFs and other instore promotions.

And this is why there is so much interest in mobile shopping list tools and coupons. Brands would love to find a way to use mobile to build relationships with their customers – and retailers are keen to thwart this.

Could we see a mobile revival of the Project Jigsaw initiative in the UK in the 90s – where Unilever, Cadbury and Kimberly Clark combined their CRM efforts to offer coupons by direct mail?

Amazon Delivers

The other part of the ecommerce business where Google and Amazon are going head to head is delivery. Google (and eBay) are trialing same day delivery in San Francisco and Amazon is expanding its warehouses across the US and here in the UK.

Now it has announced plans to expand its grocery delivery service in the US adding Los Angeles and San Francisco to its current Seattle service. This is seen as madness by some, but it looks like Amazon could use the low profit grocery business to subside daily delivery for non-grocery items.

Interestingly, one of the sources suggested that the roll out will include some non-US markets. Given the persistent rumours that Ocado is a possible acquisition target for Amazon, that could be interesting.

Would using the ubiquitous Ocado vans to deliver Amazon orders finally push Ocado into profitability? And given the very long term view that Amazon takes, would it care as long as it cements its position as the dominant player in e-commerce?

Despite its amazing revenue growth, it seems quite uninterested in profits, which makes it a dangerous competitor to anyone with a more traditional affection for ROI.

This week saw Ocado announce that it is to expand into non-food areas with a standalone website targeting pet owners and soon, toys, beauty and homeware sites. It is also allowing other retailers to use its platform and delivery service – we understand a very good Italian wine specialist will be one of the first.

This is a very good look at how Amazon is using delivery innovation to grow its business.

Making digital efficient

Boston Consulting Group has taken a look at the inefficiencies most agencies have in the way they approach digital advertising. It’s a frightening picture – and one that we certainly recognise.

Someone once said that digital advertising is the only billion dollar cottage industry as it is (was?) largely managed on excel spreadsheets. BCG obviously recommends embracing technology to solve this problem.

Given the report was commissioned by Google, we wonder if it is about to ride to the rescue with some sort of platform for agencies to use.

Bolting together DoubleClick and Google Analytics with some of the insight tools built into Adwords would be a good start. And Google has the most to gain as the biggest player. Maybe the fruit of its partnership with Publicis is about to be shared.

newTV

Channel 4 is to launch an iPad app so it has a proprietary two screen service. We remain convinced that all broadcasters will want to develop their own two screen service so they keep control and keep all the ad revenue.

Zeebox is building strong partnerships with broadcasters around the world and Shazam is doing well with some of the others in a narrower way. But the real competition is Twitter, which is where consumers go to share their views on TV.

Like a lot of the competition, the C4 app incorporates Twitter, but we wonder whether on-air promotion can pull a significant audience away from its usual Twitter client.