Over the last year, I have been tracking a story that has implications for the entire e-commerce sector (brands, vendors, agencies, and customers). Google’s relationship with one of its largest advertisers, Amazon, is strained, to say the least. What is Google’s north star, and how does it impact e-commerce platforms? Amazon spends millions to ensure customers can find whatever they need, yet it is clearly concerned over Google’s future ambitions. What is the end game for Google and Amazon?

Google and Organic Results

Google has one business—selling advertising alongside its search results. For some reason, Google feels that it needs to add artificial intelligence to its search results to help customers. I find that adding AI to its search engine is borderline crazy, as the beta has been diminishing the trust it’s built for years. Do OpenAI and Microsoft really pose such a threat that Google has to add untested technology to a multi-billion dollar business and risk losing customers? Or is this an admission that, internally, the company believes its search business has reached its plateau?

Google Kiss the Ring or Else

Consumers do not understand that Google will provide sneak previews of future products to agencies and their large advertising partners. I saw this firsthand when I worked for a company that spent a lot on digital marketing with Google. Did Google showcase this AI upgrade to Amazon, which left Amazon concerned about the future of organic search results?

For as long as I can remember, every year, there is a push-and-pull month or quarter in which Amazon and Google negotiate costs. To be clear, Amazon spends a lot on digital advertising and, in most cases, has organic search results in positions one to four on Google search engine results pages. In the months that the negotiations occur, it is noticeable that Amazon’s results differ. I am not going to open Pandora’s box related to the relationship between keywords and landing pages that are part of advertising campaigns and their upward movement in organic search results.

Google marketing live this year showcased just how much AI Google wants to use and how much it wants its partners to use its tools. However, what I find interesting is the call out, “We are seeing more five-term search results,” and then the discussion about AI summaries being shown on search engine result pages. Google marketing is all about advertising, which is totally understandable. Still, these AI summaries are yet again going to devalue organic search results, which are now going to be monetized by advertising. AI summaries were launched a year ago, but a year later, they contain advertising. I cannot remember any advertising product being monetized so quickly by Google. Amazon, like most publishers, saw the writing on the wall and likely decided it needed its own solution.

The Amazon Response Which No-one Saw Coming

If a customer starts their product search inside Amazon then this data is outside of Google’s index. This is a critical point to understand. If Amazon can turn that search into a check out and a conversion it is less dependent on Google.

So what did Amazon do? It utilized Sun Tzu’s strategy found in the Art of War. An enemy of my enemy is my friend. When TikTok grew at speed last year and potentially owned social shopping Amazon announced partnerships with various social networks such as Pinterest, Snap, Instagram and Facebook. Western social networks have struggled to solve social commerce but partnering its Amazon advertising solutions with these platforms these social customers are able to purchase products via demand side platform (DSP) without the platforms having to do anything but integrate their platforms with Amazon DSP. Amazon now enables its sellers, brands the opportunity to create ads that can be programmatically placed on some of the largest websites in the West alongside relevant keywords. Notice who Amazon did not partner with – Google and the disruptor, TikTok.

Amazon also started Buy with Prime, in which it offered brands who do not have to be marketplace sellers to access their most valuable group of buyers, Prime members. Brands simply had to utilize Amazon Multi-Channel Fulfillment and Amazon advertising via an agency to grow their businesses through this program. What no-one saw and spoke about – on Prime Day, you know when Prime memberships are required to access promotions and deals Amazon was sending traffic off of Amazon to brand websites. I still believe that Buy with Prime has long term implications for Amazon and believe that we have not seen the last of this program.

Amazon also partnered with some very large publishers to enable them to showcase Amazon advertising on their platforms. Amazon enabled Hearst and other publishers to offer sponsored product advertising on their websites. Amazon is betting that relevant advertising will help publishers drive Amazon advertising off of Amazon.

In both cases above, Amazon is not the end destination for customers but rather a distributor of traffic to other parts of the web to generate a conversion. Sound familiar?

What is this Really About?

Amazon has been trying to be less dependent on organic Google search engine results. By using its own advertising solutions Amazon is able to offer brands, sellers and advertiser access to relevant content that will convert better than Google’s myriad of solutions.

Secondly, this is squarely a fight over cold traffic. Wait what? Amazon and Google are battling over the future of digital traffic that has no current intent aligned with it. By creating AI summaries Google wants to create intent from customers to click on an add. These searches, especially those with more than five terms, are currently not generating revenue for Google.

If the consumer can find a relevant Amazon advertisement on a social network (Pinterest, Snap, Instagram and Facebook or a product ad on a publisher this will lead to a conversion happening on an Amazon domain that sits outside Google’s index.

In Conclusion

Google has always seen Amazon as its biggest competitor, but that was for product search. Building a high-margin advertising business that is systematically eroding Google’s money-printing machine enables Amazon to leverage 25+ years of shopping data it has. Amazon is building an end-to-end digital advertising business that will likely offer cheaper and better conversion rates due to the legacy data Amazon has on its consumers and their transactions.

Tactics and Strategy

If you are a US brand operator and executive – you should be kicking the tyres on Amazon advertising. Google’s advertising tools are currently complicated and more expensive than Amazon’s. I have seen examples of companies moving advertising budgets away from Google and getting better return on investment than what they saw with Google. I would also be looking at Ampd which will assist your Google campaigns.

For Non-US operators and executives – understand that Google Pmax has limitations. Understanding that higher conversion costs is happening accross many plaforms should force you to look into other tools such as Pinterest, and the recently public Reddit.

Agencies – if you serve e-commerce businesses – I would be investigating the use of Amazon advertising. Just utilizing the same tools as your competitors makes no sense. Secondly large enterprise customers – keep your agency on their toes – are they offering you Amazon advertising as part of your engagement. This is no longer nice to haves this is increasingly table stakes.

Private equity firms – are you ensuring that your portfolio companies are using the correct tools to drive lower costs on conversions and better economics. I would be asking agencies if they are looking into Amazon advertising and whether your Google advertising is optimized to drive lower costs?