Google is missing out on the Covid e-commerce revolution
Google advertising sales fell 8% in the second quarter, causing overall revenue at parent Alphabet to shrink for the first time.
The Covid-19 pandemic is fueling an e-commerce boom as shuttered businesses move online -- but Google isn't benefiting in the way its big tech rivals are.
Google advertising sales fell 8% in the second quarter, causing overall revenue at parent Alphabet to shrink for the first time. The company's main digital ad rival Facebook Inc. saw sales jump 11%, while Amazon revenue soared 40%.
Those gaps highlighted how Google has struggled to parlay its online search dominance into a meaningful e-commerce business. Google's shares fell 3% on Friday, while Amazon rose 4% and Facebook jumped 8%.
While Google runs the world's largest search engine, US consumers are more likely to look for things to buy on Amazon. Facebook's Instagram has focused heavily on online shopping, and Facebook itself recent unveiled a big e-commerce initiative. Meanwhile, Google's ad business has been hurt by exposure to the travel industry and brick and mortar retailers, which have been devastated by the pandemic.
Google was asked about this disparity during a conference call late Thursday. “We've gone through this pandemic where there is a real inflection point. We see it in Amazon's results,” Mark Mahaney, an analyst at RBC Capital Markets, said. “I'm not sure I see it in Google's results.”
The internet giant is aware of the problem. During Thursday's call, Chief Executive Officer Sundar Pichai spoke repeatedly about the company's e-commerce initiatives.
He highlighted more investment in a Buy on Google feature that lets people purchase products directly through search results without having to go to a retailer's website.
The CEO also touted Smart Shopping campaigns, a type of ad that lets merchants upload their products, set a marketing budget and then leaves Google's artificial intelligence software to decide when and where to place ads around the web. The process is meant to make advertising easier for smaller sellers.
The company's YouTube unit is also pushing more ads and features that let people buy directly from the video site.
Google is trying to make direct commerce a bigger part of its business in other ways, too. In recent months, it has opened up its Google Shopping marketplace to more merchants, dropped transaction fees and let any seller upload product listings for free. Before this, Google Shopping was mostly an advertising operation that required retailers to pay when consumers clicked on product ads.
“Users come to Google a lot to find the products they are looking for,” Pichai said on Thursday. “Sometimes, the journeys may fail because they don't find what they're looking for, so we want to make sure it's comprehensive.”
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