Android Intelligence Analysis

Google is creating its own Amazon right under our noses

How an innocuous-seeming announcement speaks volumes about Google's shifting ambitions — and its efforts to remain relevant in a rapidly changing world.

Google Amazon
mohamed_hassan / JR Raphael (CC0)

The future of Google revolves around Assistant. That much is apparent — and the company's ongoing focus on its virtual assistant above everything else (and as a thread connecting everything else) serves as a constant reminder.

The unanswered question, though, has long been how Google will make money off the spoken inquiries so many of us are slinging into Assistant's ears. After all, whether we're talking to our phones or shouting at smart speakers like Google Home — the latter of which are exploding in popularity, by the way, with IDC estimating a whopping 184% growth from 2016 to 2017 — no one wants to hear ads sprinkled in with their answers.

(An "experiment" Google ran with Assistant on Google Home last spring pretty much confirms this, if it wasn't already obvious.)

Google's in an unusual position with this conundrum, as I laid out a few weeks back. For Amazon, the current smart speaker market leader, the benefit of getting you in the habit of using its virtual assistant is simple: It makes it meaningfully easier for you to order stuff from Amazon — and encourages you to do so without any comparison shopping, no less. It's all about "minimizing friction," to use the cringe-inducing industry lingo.

Now, it seems Google may be taking a page from that playbook — with, of course, its own Googley twist.

Google Assistant and the profit-turning challenge

Let's set the scene first, shall we? Google's core business has always been about ads, and everything it does has ultimately served to support that business. It's a pretty straight-forward arrangement: The more time you spend online and using various Google services, the more data the company can collect about you — and the more effective ads it can serve you across the internet.

And sure, Google's also now positioning itself as a hardware manufacturer, but the profit from that effort is a drop in the bucket compared to the ad behemoth beneath the surface. Plus, Google's motivations as a device-maker are drastically different from the motivations of most other companies, as there's a second and incredibly significant dimension involved:

Getting you to use Google hardware lets Google provide you with a better ongoing user experience, with Google services at the center. That, in turn, gets you to use the internet and Google services more frequently, which means Google can collect more data about you and...well, you know the rest. Even when it's about hardware, for Google, it isn't ever truly just about hardware.

The problem is that all parts of this model depend upon Google's ability to show you ads. Without that element in place, none of it adds up. And if you're doing more and more of your searches through nontraditional venues — like speaking into a phone or smart speaker — there's no great way to get to that point of payoff.

In the short term, getting Assistant everywhere in your life keeps you invested in Google's ecosystem. But if traditional search is eventually going to take a back seat to voice-powered search, as most prophets seem to predict, the whole system (aka Google's core business model) is at risk of becoming irrelevant.

Searching for a more future-proof plan

Up until now, Google has dodged questions about how it'll solve this and turn both smart speakers and Assistant in general into a viable long-term business. "We're just focusing on user experience for now," the typical non-answer goes. "The monetization strategy will come in time."

Well, my darlings, it appears that time has arrived — though most folks don't yet seem have made the connection. The revelation came by way of an AdWords announcement and an accompanying Reuters report at the start of the week. It's something called, rather generically, the Shopping Action program. (I assume it'll be rebranded at least 17 times between now and November.)

The gist of it is that Google will let retailers have their products listed in both regular search and within Google Assistant — not for the typical advertising fee but in exchange for giving Google a cut of each resulting sale. Google will use its Google Express platform to make the actual act of purchasing pain-free, consistent, and seamless for customers. Retailers ranging from Target to Walmart, Home Depot, and Costco are already on board.

The effort is being framed as a way to let retailers better compete with Amazon: As it stands now, Google tells Reuters, "tens of millions" of shoppers are asking Google questions about products — and then ending up at Amazon when it's time to make a purchase. The hope is that this new program could provide the enticing last-step detour retailers have struggled to establish on their own:

For consumers faced with a surfeit of choices, the idea is to make online buying easier by giving them a single shopping cart and instant checkout — a core feature of Amazon’s retail dominance. ... Retail chains can also offer products through the Google Home voice shopping device, holding on to those who may be headed to Amazon for better deals and giving them personalized recommendations based on previous purchase history.

Google Shopping Actions Google

Hold the phone, though: There's another layer at work here, and it's where the grander narrative resides. While simultaneously helping retailers compete with Amazon for buying dollars, this move will help Google compete with Amazon by giving it a way for its ad business to stay viable in a voice-centric realm. In this model, the "advertisers" will still be paying to reach you — just in a different manner than they did in the past. And in doing so, they'll position Google as the guardian and gatekeeper of a new "everything store" — one that offers already-established direct lines into countless shoppers' lives.

The company is effectively creating its own Amazon right within its search results, in other words, and it's doing so in a way that's designed to work as effortlessly from a smart speaker as it does from a browser page. Much like Android and Chrome OS, it's a decidedly decentralized version of an existing concept: Google will rely on a variety of other companies to provide the goods while it uses its reach and expertise to provide the platform's underlying systems and structure.

That, my friends, is a fascinating play. And it's one that could very well turn into a significant part of Google's future foundation.

The $27-billion-dollar question is if it'll actually work — especially when it comes to the pivotal and largely untested realm of voice-based inquiries. And that, for the moment, is a question even Google Assistant can't answer.

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