How Amazon's Rising Headwaters Could Threaten Google

Guest author Derek Brown is a technology executive and analyst who blogs at One Blind Squirrel.

Jeff Jordan, a partner at Andreessen Horowitz with the Midas touch, recently opined that Amazon’s e-commerce capabilities and successes represent a meaningful threat to Google’s product-search-related advertising business.

I will take Jeff’s thesis — with which I fundamentally agree — one step (maybe even more) further by saying that I believe Amazon is one of the few companies that has the ambition, permission, structure, and, maybe most important, data, to actually beat Google at its own game.

What Makes Amazon Different

As an Internet equity research analyst from 1996-2009 — go ahead... throw your drink on your screen and curse me loudly enough that the barista hears you — I had a front seat to The Show. I covered Amazon from its days as “just” a bookseller and Google when it was still a private company, in addition to eBay, Yahoo!, Excite,, Netflix, Omniture, aQuantive, CNET, E*TRADE, and many other industry-defining companies.

(See also: The Epic Battle Between Apple And Google Is Over)

From the earliest days, it was clear to me (and a few others, obviously) that Amazon was no ordinary company, at any level. However, three attributes set it (far) apart in my mind:

  1. Vision and ambition that were orders of magnitude beyond those of others team that I encountered (until, that is, I met Google);
  2. A cult-like dedication to customer experience/satisfaction that permeated every decision made by every person at the company; and,
  3. A business model that not only valued long-term cash flow and absolute profit potential, but also deemed near-term profits and profit margin largely irrelevant.

Individually, these characteristics have been powerful; in combination, they have been revolutionary. Jeff Bezos’ worldview gave his entire team permission — in fact, it gave them the mandate — to think Big, with a capital “B.” Customers’ pure delight with every Amazon interaction gave the company permission to sell (almost) anything to (almost) anyone.

And, finally, management’s clarity of financial intent (i.e., to perpetually focus on long-term potential) has, from day one, conditioned shareholders and Wall Street to expect a business that will forever be amorphous and unpredictable, with razor-thin margins.

The Yin To Google's Yang, Sort Of

Liberated from more typical corporate constraints, Amazon has evolved like few other companies in history — from its humble origins as an online bookstore into: Amazon Elastic Cloud Compute, Amazon Marketplace, Amazon Flexible Payments Service, state-of-the-art warehouses (~70) everywhere, Amazon Cloud Player, AmazonFresh, Amazon Mechanical Turk, Amazon Prime, A9, Amazon Simple Storage Service,, Silk, Amazon Cloud Drive, Zappos, Amazon CloudFront, Kindle, and so on.

Sound familiar? It should, because this transformation mirrors that of Google, itself, which began as “just” a search engine company focused on “organizing the world’s information,” and has now become: Gmail, Maps, Apps, Drive, Chrome, Android, Motorola, YouTube, Wallet, Voice, Google Cloud Storage, Shopping, Chromebook, Google App Engine, Google+, and so on.

(See also: How Google Is Kicking Sand In Apple's Face)

While not perfectly matching each other solution-for-solution, Amazon and Google now find themselves overlapping across, and competing within, most major categories of Internet-fueled technology and business. SaaS. Hardware. e-Commerce. IaaS. Enterprise. Media. Consumer. Applications. Browsers. Storage. Payments. Consumer. Tablets. And so on.

Amazon's Trump Card: Data

Despite all these evolutions and comparisons and similarities and overlaps, I actually think there’s one final aspect to Amazon’s business with which Google cannot (yet) directly compete, and which may prove to be the difference-maker in this faux-ish battle: Data.

With 17+ years of history and hundreds of millions of transactions across almost every category of goods, Amazon now has massive quantities of data about the actual buying habits of tens, if not hundreds, of millions of consumers around the globe. Not just what people are searching for (Google, though actually has it too). Not just what people “like” (“like” that, Facebook).

(See also: Will Facebook Go Out With A Bang?)

Not just what people want (Pinterest, though actually has it too). Not just what people tweet about (Twitter). But the items that people actually pay for with their own hard-earned dollars!

Armed with this unique transaction- and SKU-specific data, at scale, has the potential to become one of, if not the most signficant advertising platforms in the world, in my view — matching, if not besting, Google.

Look at it this way: if advertisers pay Google $44 billion per year for connecting them with consumers that it oftentimes thinks have interest in their product(s), what might those same advertisers be willing to pay Amazon for connecting them with people they know are interested in their products (or those of their competitors, or those in which they will soon have interest)?

What That Data Might Be Worth

For instance, do you think Volvo, Toyota, Lexus, Ford, et al., might be willing to pay a small fortune to be introduced to an individual in Huntington Beach, CA, who suddenly begins buying newborn diapers by the pallet? What about Gymboree? Gerbers? Whole Foods? Safeway? Fab? Gap? Pottery Barn? Ross? Home Depot?

Similarly, how much interest might be generated among home decor vendors, local service providers (e.g., physicians, athletic clubs, veterinarians), home maintenance vendors, etc., by a change in shipping and billing information for one of’s long-time customers? Say, someone whose pattern of purchases are highly suggestive — remember, has developed one of the best predictive commerce models in the world for its own e-commerce franchise — of a home with at least one child and one dog, an avid athlete/runner/yogini, with a taste for gourmet cooking and a passion for gardening, among other attributes?

And these hypotheticals say absolutely nothing of the extraodinary value Amazon could (theoretically) deliver to its customers/partners by sharing with them relevant online transaction activity that might follow said advertisements, effectively offering a closed loop marketing environment unlike any other.

By some accounts, Amazon has (finally) started focusing on the business potential of advertising. For years, it has run ads on its own sites. Then, in late 2010, the company also began serving advertisements on others’ sites, introducing what is, in effect, a full-fledged online advertising network. But these are just warm-ups in my mind — Amazon methodically experimenting (as is its custom) and purposefully tiptoeing around the edges of its potential.

I’m convinced the day will come — sooner rather than later — when Amazon unleashes its data and announces itself as an advertising powerhouse. And, when it does, I think the gloves officially come off and the real battle with Google commences.

Lead image via Flickr user Jorge Lascar, CC 2.0