Goggle and Yahoo: Future Amazons?
Continuing from yesterday, a reader asked, "Would Google or Yahoo ever get into the web superstore business, since they really exist to monetize search?"
Let's look at Google first. Google monetizes search through advertising. They do not sell merchandise and are unlikely to do so, because it would put them into competition with their advertisers and undercut their overarching strategy.
Yahoo is not so easy to nail down. In search, Yahoo's 20% market share based on usage is a distant second to Google and is declining. Yahoo CFO Susan Decker said recently, "We don't think it's reasonable to assume we're going to gain a lot of share from Google. It's not our goal to be number one in Internet search. We would be very happy to maintain our market share." However, they have been increasing their search advertising revenue, as both the size of the total market and Yahoo's search ad sales effectiveness have increased. So they face the same inhibition Google does: if they sell merchandise, they risk competing with their advertisers.
Search, however, is but one dimension of Yahoo's multifaceted strategy. Yahoo is an-all-things-to-all-people megaportal with the soul of a media company. As CEO Terry Semel has said, their goal is to "provide our users and advertisers with richer and more relevant experiences" than any other portal. "Yahoo reaches 73% of all Internet users in the U.S. in any given month, which speaks to the breadth of our product suite. Yahoo reaches more people in more ways than any other company on the web." What was left unsaid is that Yahoo will attempt to monetize these visits any and every way it can, be it by advertising, subscriptions or other fees.
Yahoo does sell things that can be delivered online, like they do with Yahoo Music. But there is a compelling reason I do not see Yahoo or Google entering the web superstore business for non-electronically delivered merchandise. Amazon has erected significant barriers to entry to this business. Its massive distribution infrastructure alone presents a formidable barrier, and Jeff Bezos has been consistently willing to up the ante by investing in technology instead of posting profits.
I just cannot envision Google or Yahoo heading off on the costly, risky tangent of large scale retailing of hard goods.
Copyright © 2006 Philip Bookman
Technorati: Google Amazon Yahoo
Let's look at Google first. Google monetizes search through advertising. They do not sell merchandise and are unlikely to do so, because it would put them into competition with their advertisers and undercut their overarching strategy.
Yahoo is not so easy to nail down. In search, Yahoo's 20% market share based on usage is a distant second to Google and is declining. Yahoo CFO Susan Decker said recently, "We don't think it's reasonable to assume we're going to gain a lot of share from Google. It's not our goal to be number one in Internet search. We would be very happy to maintain our market share." However, they have been increasing their search advertising revenue, as both the size of the total market and Yahoo's search ad sales effectiveness have increased. So they face the same inhibition Google does: if they sell merchandise, they risk competing with their advertisers.
Search, however, is but one dimension of Yahoo's multifaceted strategy. Yahoo is an-all-things-to-all-people megaportal with the soul of a media company. As CEO Terry Semel has said, their goal is to "provide our users and advertisers with richer and more relevant experiences" than any other portal. "Yahoo reaches 73% of all Internet users in the U.S. in any given month, which speaks to the breadth of our product suite. Yahoo reaches more people in more ways than any other company on the web." What was left unsaid is that Yahoo will attempt to monetize these visits any and every way it can, be it by advertising, subscriptions or other fees.
Yahoo does sell things that can be delivered online, like they do with Yahoo Music. But there is a compelling reason I do not see Yahoo or Google entering the web superstore business for non-electronically delivered merchandise. Amazon has erected significant barriers to entry to this business. Its massive distribution infrastructure alone presents a formidable barrier, and Jeff Bezos has been consistently willing to up the ante by investing in technology instead of posting profits.
I just cannot envision Google or Yahoo heading off on the costly, risky tangent of large scale retailing of hard goods.
Copyright © 2006 Philip Bookman
Technorati: Google Amazon Yahoo
Labels: software strategy
posted by Phil Bookman at 10:01 AM
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