Amazon v Google - The Battle of The Middlemen
Do you remember, way back, when people started to sell online? There was much talk of disintermediation, cutting out the middlemen. The internet would now allow you to buy direct from the producer rather than going through a retailer. It was the beginning of a revolution, the Network Era if you like, but as early as 1994, when Jeff Bezos launched Amazon, some people understood that retailers are a necessary evil because, along with things that are perhaps less important, like local stockpiling and the opportunity to see and touch the product, they facilitate comparison.
Today, rather than walking around department stores, or up and down the High Street, we can go online and search for products and compare offerings before we buy. This is the Era of the Search Engine, and as is natural in the evolution of most living things the survival of the fittest has given us two players who dominate all online product searches – Amazon and Google. We haven’t got rid of middlemen, we have just changed the rules of the game and given all the intermediary power to two organisations who can help and hinder us in different ways. But how do they differ and how should you use them to develop your own ecommerce business? Here are the key differences between the two platforms:
- The main benefit you get from using Google is control (of customer data, brand image, customer experience) whereas for Amazon it's scale and volume, and ease of ramp-up of your business.
- You are better able to target customers more broadly & more intentionally across the purchase funnel via Google platforms (awareness - consideration - purchase - reengagement) whereas Amazon tends to sit only in the lower funnel purchase zone.
- You can combine your own 1st party customer data with Google demographic/user data to target higher value customers & prospects, whilst retaining ownership of that data. (Amazon offers a lot of targeting options through Amazon media, but you'll have to hand over your data.)
- On Google you can also more easily ramp up/down spend or supply at any stage to fit your business needs (research suggests that Amazon sellers typically have to commit to certain volumes to maintain their relationship over time.)
You also need to understand that, first and foremost Amazon is a retailer. So, why would you want to collaborate with a potential competitor? While they are happy to sell your products, it is in exchange for far more than cash; you need to give them ownership of your customers and a detailed understanding of demand and pricing of your products and services.
Amazon are voracious and efficient, the top predator in the ecommerce food chain, and they will compete with you if it makes commercial sense to do so. So, why would you want to sell on Amazon? Well, they are very popular with customers because they offer a very wide choice and the easiest sales process online. They are masters of sales completion, amongst many other things, but it is this that makes it easy to keep customers using them. Oh, and it’s easier than doing your own thing.
If you want more control, use Google. But you have to do more of the heavy lifting and get out there and stake your claim on some niche, defend it, and protect it from all comers. It makes it much more of a challenge, and you need a broader range of skills, but it has a more satisfying and valuable endpoint, as you are still in control.
Both Amazon and Google will charge you for getting noticed but with Amazon the costs are far more than money: you are vesting ownership of your customers, your products, and to some extent the equity in your business to Amazon. But, in many cases it makes sense to do so. Amazon is so successful because for many online retailers the cost/benefit analysis, albeit often implicit, comes out in favour of swallowing your entrepreneurial pride and getting on the Amazon bandwagon.
Of course, many of us cover both bases by selling on both platforms. That’s ok, as long as you are aware of the downsides. Our general advice though is as follows:
- If you are an established business with strong, proven products and brand, stay well clear of Amazon and invest in building a differentiated online presence which you control. If you don’t have the skills or experience but want to go this way, get help. Perhaps from us.
- Choose Amazon if you are starting out, need to test your ideas, and want to get some feedback from customers at minimum cost and risk. It follows that, once you have proven your business idea and start to build sales you might want to set up your own store, promote it on Google, and learn the tricks of the trade of recruiting and managing your own customers.
Like football, ecommerce games are also won or lost by the strength of the midfield and we are lucky to have two powerful midfield players to help us win online. The choice is simply one of control, marketing sophistication, and just how much effort you are prepared to put into building a distinctive and truly independent business. You can choose a midfielder who also supports the club, or one that secretly support another team, his own.