Google Just Caught the Amazon Ad Disease
January 3, 2018
The ideas are good. Build up revenue from online sales. Diversity revenue and offset infrastructure costs, the bane of Alphabet Google. Open new channels with consumer hardware. Then look around for a competitor with a back injury or a wobbly knee and run plays at that weak spot.
Football American style?
Nope. Just Amazon’s apparent 2018 game plan.
I read “What It Means That Amazon Is Bringing Ads to Alexa.” (I must admit the working of the title was interesting with the phrase “means that”.)
The point of the write up focuses on the consumer “experience.” Sigh. I learned from the write up:
Amazon is reportedly testing out various ad types, including videos and promoted paid search results (a la Google). CNBC reports that Amazon is preparing for a “serious run at the ad market” that could begin as soon as this year.
I understand the counter argument: Google’s ad revenue is “safe.” See, for example, the analyst think in “Amazon’s Advertising Push Will Not Threaten Google’s Search Business, Analyst Says.”
My view is that Google is dependent upon online advertising. In the company’s two decades of making relevance irrelevant, Google lacks Amazon’s revenue diversity.
I may be a simplistic hick living in rural Kentucky, but it seems to be that the cost to Amazon to probe online ad revenues poses few risks and comparatively cost-free opportunities for the digital behemoth.
Let’s assume that Amazon is only partially successful; that is, the company lands a few big advertisers and confines its efforts to ads in Amazon search results and to Alexa outputs.
Google will have to spend big or cost costs in order to make up for the loss of a handful of big advertisers. The problem is similar to that Westlaw and LexisNexis face when a big law firm dies or merges with another firm. The revenues are expensive, time consuming, and difficult to replace.
Assume that Amazon is quite successful. The erosion of Google revenue may be modest at first and then map into one of those nifty diagrams for the spread of cancer. My recollection is that Sartwell’s Law may be germane. See “Sartwell’s Incubation Period Model Revisited in the Light of Dynamic Modeling.”
Amazon advertising may be a form of cancer. If it gains traction, the cancer will spread. Unpleasant metaphor, but it illustrates how Amazon can undermine Google and either [a] force Alphabet Google to spend more to remain healthy, [b] weaken Google so that it cannot resist other “infectious” incursions like governmental actions related to taxes and allegations of unfair practices, or [c] set Google up for gradual stagnation followed by a phase change (collapse).
In short, whether one is pro or anti Amazon, the testing of Amazon ads warrants watching.
Stephen E Arnold, January 3, 2018
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