A New Google Venture, and Another Web Boundary Line Is Nudge
Source: CLAIRE CAIN MILLER
In another foray into commerce, Google is working on a delivery service that would let people order items from local stores on the Web and receive them at their homes or offices within a day.
The service is in an early testing phase, and it was described by three people briefed on the project who were not authorized to speak about it publicly before it was announced. It is part of a bigger, strategic effort by Google to move beyond its core search business by helping people buy things, not just find them.
Other parts of this strategy include Google Wallet to make payments by cellphone, Google Offers for daily deals, apps that show location-based mobile ads and product search for local stores.
The idea behind the new delivery service is that people searching for products online or on their phones could buy something from a local retailer or the local branches of nationwide chains, and could then take the next step ― delivery ― through Google.
Google does not intend to build stores or warehouses or become a retailer itself, two of the people briefed on the delivery service said. Instead, it is talking with potential partners, including retailers and possibly couriers.
The service is the latest example of how the biggest tech companies ― including Google, Apple and Amazon ― are trying to branch out and, in the process, blurring the lines between their core businesses.
For example, Apple’s iTunes business is formidable, and much of its success in selling phones and tablets, which compete with Google’s Android and Chrome devices, comes from its retail stores. And shoppers increasingly search Amazon directly, instead of looking first for products on Google, in part because of Amazon’s Prime program, which offers free two-day shipping for a $79 annual fee. Amazon also operates AmazonFresh, a local delivery service focused on groceries, in Seattle.
“Google is arguably at a competitive disadvantage because consumers view Amazon and maybe eBay as guaranteeing over all a higher-quality shopping experience, and retail ads are almost half of Google’s business,” said Eric Best, chief executive of Mercent, which does online advertising and e-commerce on Google, Amazon and other sites for 400 brands.
Google wants to use mobile phones and the Web to connect shoppers with merchants, both online and offline, and benefit by selling ads to merchants, one of the people briefed on the project said. Eventually, Google hopes, the delivery service would be integrated into Android mobile devices and Google Plus, another person said.
If Google decides to move forward with it, the service would start in a few cities, including San Francisco and New York, one person said.
It is unclear whether Google would take a cut of the revenue from sales or make money only on merchant ads. Google does not take a portion of payments with the Google Wallet mobile app, but it does earn money from sales of Google Offers.
Local online and mobile ads are a growing revenue source for many companies, including Google, Amazon, Groupon and Yelp.
Local digital advertising revenue will be $23 billion this year, just 17 percent of total local ad revenue, but the portion will grow to 25 percent by 2015, according to BIA/Kelsey, a local media research firm. Local advertising contributes heavily to Google’s biggest businesses; local search ad revenue, now $6 billion annually, is growing 10 percent year over year, and more than half of mobile ads are local.
The new delivery service, which was first reported by The Wall Street Journal, fits squarely into Google’s broader efforts to use its search engine to connect merchants and shoppers.
In the last year, it has enhanced its product search and introduced new ad formats for retailers. It now shows sites that carry an item and compares prices and shipping fees, and connects with stores’ inventory feeds to show where the item is in stock nearby. The new service would be an extension of that.
With Google Offers, the company sells daily deals for local businesses. In October, it began testing Google Trusted Stores, which verifies e-commerce sites as trusted retailers, based on shipping and customer service. Google promises to refund the purchase price or replace items for shoppers dissatisfied with a trusted store’s service. And with Google Wallet, people can pay for items online or offline with their phones.
Perhaps Google’s biggest hurdle in competing with companies like Amazon and Apple in becoming a commerce business is collecting credit card numbers, which enables quick purchases of things as diverse as digital music and offline goods. Apple has said in the past that it has more than 225 million credit card numbers, and Amazon has the credit card information of tens of millions of customers.
“Privacy concerns notwithstanding, the best way to target a consumer with relevant offers is based on their buying behavior and purchase history,” Mr. Best said. “That’s another huge strategic advantage for Google to participate in the transaction.”
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