Amazon vs. Google
Right now, Google has a market capitalization of 395 billion dollars, the second largest in the country. An alarming ninety six percent of Google’s revenue comes from advertisements on a pay per click system, where advertisers pay Google a certain amount of money per click of their advertisement (and the price per click is determined by an auction). Not surprisingly, Google is not the only search engine to use pay per click advertisements, considering the fact that it generates them so much revenue every year. Other engines such as Yahoo!, Bing, and Amazon use pay per click methods to generate revenue.
Although Google uses a mass of online advertisements, Amazon may be Google’s biggest competition when it comes to clicking and shopping. A recent survey by BloomReach concluded that 44 percent of online shoppers start with Amazon as their primary product search. While Google is trying to minimize this competition, Amazon is gaining revenue with their growing base of Prime subscribers. Another recent challenge to Google this past summer was Amazon’s change to its online advertising policy. Amazon, as of October 31, will end its pay per click advertisements on its site in place of text only ads. Currently, pay per click ads on the site give links to external sites, which actually takes shoppers away from Amazon to other places to search for products. While this is especially helpful to outside retailers who want Amazon’s customers to see their products, Amazon wanted to “cut into Google’s online advertising market share.” Many of the external links shown are placed there by Google, which generates revenue for Google while directing potential Amazon customers away.
Amazon’s new text ads utilize keyword based targeting instead of the previous Product Ads, and the cost per click will be much lower. Roman Fitch, Retail Search Manager at CPC Strategy, noted, “I don’t know if Text Ads are going to have long term positive effects, but they definitely have first mover advantages right now. Once it becomes a full auction, retailers are probably going to be paying a lot more.” This change and possible “direct challenge to Google” shows how important pay per click advertisements are to search engines and their market share in the long road, and how engines can use these online marketing strategies to compete with each other.
Amazon’s current Product Ads to external sites.
Souces used:
http://blogs.wsj.com/digits/2015/08/11/amazon-tweaks-ads-on-its-site-in-possible-challenge-to-google/
http://www.fool.com/investing/general/2015/10/18/why-google-hates-amazon-prime.aspx
http://www.cpcstrategy.com/blog/2015/09/amazon-text-ads/