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Early in July this year, Temasek and Google were said to invest in Indonesia’s top e-commerce player, Tokopedia. 23rd. October, a number of mass media reported at the same time that Google invested $300 million in Tokopedia, which is in the same round with Temasek’s $500 million.
This is not the first time that Google invested in e-commerce platforms of the emerging markets. It has invested in several e-commerce players around the world, and strengthened the construction of its own e-commerce ecology. And all of those moves show its ambition to enter into ecommerce market. In the past, Google could not find out the right way to fulfill its ambition, while it focuses its e-commerce business on its flagship product, YouTube. It aims at making YouTube an e-commerce platform.
As the largest video website all over the world, YouTube began to ask its creators to use YouTube’s software to mark and track the products in their videos. And all those data will be linked to Google Analytics. In the future, videos in YouTube will become a huge catalog, and their audience are able to order all kinds of products in YouTube.
This is not the first time that Google announced to enter into e-commerce market. Google has realized the fact that it has missed the right timing to enter into e-commerce market, and its search engine and advertisement distribution business cannot help in this new field.
Google Ads, First Drop in 16 Years
The outbreak of Covid-19, to some extent, has contributed to the development of e-commerce, as the lockdown policies have forced the stores to shift their businesses online. Sadly, unlike other competitors, Google doesn’t benefit from it.
As eMarketer estimated, Google’s advertising revenue will reach $39.6 billion, with a 5.3% drop compared with last year, where advertising revenue was $41.8 billion. Even though its advertising revenue is far higher than its competitor, Facebook and Amazon, its share in the U.S. e-advertising market reduced from 31.6% to 29.4%, which is the first decline since 2004.
Covid-19 has caused great damages to a large number of companies, especially to hotels and airlines. Even AirAsia, the largest budget airline in Malaysia plans to build its digital platform. And those companies were Google’s main advertisers. In the second quarter, Google’s advertisement revenue dropped by 8%, while its competitor Facebook and Amazon kept growing with the help of the booming e-commerce market. The growing rate of Facebook was 11%, and the growing rate of Amazon was 40%. Therefore, we can conclude that Google’s global leading search engine shows no advantages in e-commerce, even though we see a dramatic increased online shopping demand at the moment.
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Invested on E-commerce for Times, with Little Success
In the recent two years, Google, the online advertisement giant, took its initiative to invest in e-commerce market. In June, 2008, Google has reached an agreement with Carrefour to sell groceries online. From 2019, Carrefour also bound its online store with Google’s products or services, which provides more convenience when shopping online. Google Home and Google Assistance are two examples.
And then, Google announced its cooperation with JD.COM, with Google’s $550 million investment to JD.COM, the two companies have established a partnership in a wide range. After the investment, Google and JD.COM will work together on a series of strategic projects, one of which is to develop solutions for new retailing in the areas of South-east Asia, America, Europe, and so forth. With advantages on supply chain and logistics and Google’s advantages on technology, the two companies aim at exploring the solution for constructing the infrastructure of retailing for the next generation.
The cooperation with JD.COM aims at achieving two objectives. The first one is to boost digitalization of retail enterprises, and the second one is to shift its search engine to e-commerce platforms, especially for mobile devices, since Google’s product advertisement revenue is already facing challenges from e-commerce platforms like Amazon and the others. It’s quite urgent that Google should define its own advantage in e-commerce.
Apart from cooperation with the other companies, Google also launched a mobile video shopping platform, Shoploop, focusing on “Video + Commerce”, “Entertainment + Commerce” and “Social + Commerce”. And it targets at the young generations like Tik Tok and Instgram.
To ride the big trends of increasing online shopping demand, in April 2020, Google announced that American Enterprises can start their online store in Google Shopping for free. And then extended its free services to Google Search. In addition, it announced in July that enterprises who join the Buy on Google platform do not need to pay any commission. Combining its business with PayPal and Shopify, Google is going to build a better cross-border ecology.
However, Google Shopping, with low brand awareness among the consumers, failed to achieve the expected effect.
The Necessity to Break New Ground
As the well-recognized advertisement giant, Google achieved an advertisement revenue of $116.3 billion in 2018, which accounted for 70% of its total revenue, and exceeded the total advertisement spending of all countries (America excepted). In the same year, Google revenue of global digital advertisement accounted for 32% of total advertisement revenue. The large amount of cashflow from advertisement decreased Google’s motivation to enter other fields. And at present, we can make a conclusion that a company relying too much on advertisement business will not last for long, no matter it’s because of the epidemic or because of the dropping market share.
On the opposite, Facebook emphasizes on mobile payment, invests on small businesses, and develops a series of video APPs to challenge Tik Tok. And Amazon takes the advertisement market share from Google with the help of the AWS and global e-commerce business. The outbreak of Covid-19 helps the development of e-commerce digitalization, and the stock price of Amazon keeps increasing recently, making Amazon the biggest winner among the IT companies. And these make Google (who is counting its earnings from advertisement) feel in danger.