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Amazon.com, Inc. (AMZN) Is Hurting Alphabet Inc (GOOG) Already

Amazon.com, Inc. (NASDAQ:AMZN) Jeff Bezos

Amazon.com, Inc. is proving to be a real threat to Alphabet Inc , . And things might just get worse for the search engine giant. While the world is focused on the glitzy news surrounding Google’s self-driving cars and Amazon’s $50 tablet, the real battle is being fought away from the public glare.

Apple Inc. loses to amazon.com Inc. (NASDAQ:AMZN) earnings

Amazon is Synonymous with Online Shopping

A recent study by software start-up BloomReach showed that up to 44 percent of respondents directly went to Amazon.com, Inc. when looking to buy online or do product research. Google was far behind at 34 percent.

For the sake of comparison, let us turn our attention to a 2012 Forrester Research survey. Three years ago, only 30 percent of online shoppers started on Amazon. Of course, the comparison isn’t perfect, considering that they were carried out by two different firms. But there seems to be a trend. Amazon is by far the first stop, not just for online shoppers, but also those carrying out product searches. That dominance is seeing a steady increase.

Amazon.com, Inc. ’s success is driven to large extent by its Prime membership program. Prime users pay an annual fee of $99 to receive benefits such as two-day shipping, special sales, free photo storage and Amazon Instant Video. And the online retailer is steadily adding new perks to the service like free two-hour delivery in select cities, to add to its tens of millions of customers.

So How Does All this Affect Google Search?

Google is the world’s largest search engine. A user goes to Google and does a search. Results appear, and he clicks on them. Google generates money each time the user goes to the top results, which are sponsored ads.

Thus, ad clicks are a key revenue stream for Google. So how exactly does Amazon endanger this lucrative arrangement?

It all starts with the growing number of customers who altogether skip Google searches. As more people start out on Amazon.com, Inc. ’s search functions, Google loses out on ad clicks.

And all this has the potential to turn in to a viscous cycle for Google. With more and more users flocking to Amazon.com for their shopping needs, Google is denied access to valuable user information. It is important to remember that sites like Google and Amazon use your past search data to optimize future results.

If Google is deprived of vital user data from shopping searches, the function of its search engine will ultimately deteriorate. This could start a vicious cycle. Users’ shying away from Google for shopping related searches will hurt Google’s performance. And thus those very users will be less than likely to visit again!

Shares of Amazon.com, Inc. closed Monday at $544.

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