Amazon and Google’s expanding empires
Both companies began expanding beyond their original business models fast. Amazon announced that it was adding 143 new product categories back in 1998, the same year Google was founded. Google, meanwhile, made its first acquisition just three years later, and by 2015 it had ventured so far beyond search engines that it was restructured as Alphabet Inc (GOOG).
As their offerings have multiplied, a fierce rivalry has emerged. Amazon and Google compete over a variety products, ranging from groceries to cloud computing, and many more. Here’s a rundown of some of the key battle lines.
The largest competition between the two companies is over their smart-tech devices – including mobile phones, tablets, video streaming sticks and smart TVs.
In 2005, Google acquired the software start-up Android Inc. and the Google mobile division was born. From the release of the first Android phone in 2008, the acquisition has been a major success story – in 2016, the release of the Google Pixel saw Alphabet’s stock reach its then all-time high of $828.84.
Amazon, meanwhile, made its first foray into smartphones – the ‘Fire’ – in 2014. But in an already-saturated space, the phone quickly disappeared from the market. Amazon revealed the Fire phone had made a $170 million loss in October 2014, which caused its share price to drop by 8%.
Comparatively, Amazon’s tablets have been a success. The Fire tablet was released in 2011 and helped its market share to grow faster than any other vendor, taking Amazon to third place in the global market in 2016.
However, Amazon is one of more than 1000 brands that use the Android operating system on their devices, and though the software is free to use, Google makes billions through mobile advertising and ad sales.
The tensions between the two companies reached new heights in 2015, when – in an attempt to steer customers toward its own products – Amazon stopped selling Google’s Chromecast TV streaming stick. Two years later, Amazon also became the only major Android tablet maker outside of China that refused to offer Google Play and other Google services.
In retaliation to Amazon’s restrictions, Google announced in December 2017 that it would be removing access to YouTube from all Amazon devices.
Before Netflix and Amazon launched their streaming services, Google took its first foray into online video platforms when it acquired the video-sharing site YouTube in 2006.
When Amazon moved into the streaming market with Prime Instant video in 2011, it was a huge success – generating approximately $2.5 billion in annual revenue by 2016. The threat was so great that in April 2017, Google launched a live TV and streaming service, YouTube TV, which would rival traditional cable TV packages as well as other internet streaming services.
Just two months after launch, Google’s stock price had risen over 19%. Within a year, YouTube TV had more than 300,000 subscribers.
Amazon and Google are among a group of tech giants battling it out over artificially intelligent (AI) digital assitants.
Amazon invested millions in start-ups that built voice-control apps for its smart speaker, the Amazon Echo, released in 2014. By 2017, it was estimated that over 10.7 million Echo speakers had been sold and that Amazon had a 70% share of the market.
Google released its own smart speaker called ‘Google Home’ in 2016 using the Google Assistant, which already came as standard on Android phones – by the final quarter of 2017, Google reported that its revenue was up 24%.
Perhaps surprisingly, Amazon is one of Google’s main search engine competitors. In 2015, approximately 33% of online shoppers skipped Google altogether and started their search on Amazon, which has one very large impact: Google loses the chance to create advertising revenue.
In 2016, approximately 86% of Google’s revenue came from its advertising service, AdWords. Google has continued to enjoy dominance over the US digital advertising market, rivalled only by Facebook (FB), but its market share is predicted to decline as competition increases.
Amazon has been identified as one of the largest threats to the duopoly. Although Amazon’s share of digital advertising market does not come close to that of Google, it is growing rapidly – generating an estimated $2.8 billion in revenue in 2017.
Amazon is the largest e-commerce company by market capitalisation, and accounts for 45% of the US market – more than four times its nearest competitor, Walmart (WMT). In 2012, Google decided it would launch its own service, Google Shopping.
The plan backfired in April 2017, when the European Commission (EC) brought antitrust charges over Google’s shopping service. It was fined $2.7 billion after the EC found the company was skewing search results to benefit its own shopping search service on Android devices. The fine saw the market value of Alphabet drop by 1.1% ($8.5 billion) overnight. Google disagreed with the claims, suggesting that Amazon had more influence over public spending habits.
Despite this setback, Google announced ‘Shopping Actions’ in 2018, which would create a partnership with some of Amazon’s largest competitors – including Walmart.