HOME
          
LATEST STORY
The newsonomics of MLB’s pioneering mobile experience
ABOUT                    SUBSCRIBE
Dec. 8, 2011, noon

The newsonomics of Google’s retail push

Google’s next-day-delivery plan may be aimed squarely at Amazon — but don’t be surprised if news companies end up being collateral damage.

It looked like just more head-butting among the mammoths of our time: Google will match up with Amazon, said the Wall Street Journal last week: “The Web-search giant is in talks with major retailers and shippers about creating a service that would let consumers shop for goods online and receive their orders within a day for a low fee.”

Most of the stories played on that Goliath vs. Goliath theme, and of course that’s an increasingly familiar one as the businesses of Google, Amazon, Facebook, and Apple overlap, intersect, and collide. Who is a bookseller? Well, Amazon, and Apple, and Google, kind of. Who is selling and renting media — well, who isn’t or preparing to do so? Who is in the hardware biz — all except Facebook? Who’s reaching for the digital ad riches, now generating $80 billion worldwide; Google, the king, and Facebook, the fast-threatening prince.

Yes, the Google/Amazon match-up over delivering goods is a good and real storyline. As big brains butt, it could be thunderous and landscape-changing. That landscape includes the news business, and you can almost feel the rumbles underfoot just with the word of Google’s move.

Let’s look at the newsonomics of Google’s would-be one-day-shipping program — let’s call it Google Tomorrow™© — and its wider impacts and strategic rationale. First, we’re talking about a lot of potential money. U.S. retail e-commerce is forecast to hit almost $200 billion this year, with the global total adding up to $700 billion. So there are many companies trying to get in the middle of it.

The idea of website-facilitated buying — and shipping — from fairly local retailers isn’t a new one by a longshot. Storerunner plied this territory, too early, a decade ago. Webvan, the best funded of the grocery deliverers went from brilliance to punchline in about 30 seconds. Shoprunner is currently out there, pitching the same idea as Google Tomorrow. Newspaper companies have been more steadfast, more the tortoise in the race for perfection of our emerging online/offline commercial world.

Companies like the Gannett-owned ShopLocal and independent Travidia, with its FindnSave product used by McClatchy and other news chains, have been building the know-the-local-retail-inventory, compare-prices-and-buy terrain for years. Unlike what Google may do, they don’t deliver one-click buying and delivery. They offer product selection, availability and then click off to retailer’s own sites for buying and shipping or store pickup. The idea seems like a great one, a merger of the best of online and offline, yet it’s been slow to grow. Every time I’ve checked out the sites, I’ve found the promise smart, but the inventories too uneven or the hierarchy of results skewed to preferred shops — not my preferences. Consumers have clearly opted for Amazon over these kinds of sites.

The impact on the ShopLocals and FindnSaves is not what should concern newspapers, though. The big issue: retail advertising.

While the web has greatly damaged newspapers’ classifieds and national ad businesses, retail has been a relatively stronger area. Worth about $13 billion last year — or half of daily newspapers’ ad revenue — it’s a lifeline at this point in the tough print-to-digital transition. Retail is being challenged on several fronts, with the Sunday preprint business a big concern. In fact, both Google and newspapers are pursuing e-circulars to counter the inevitable print downturn in that area.

Wait a minute, you may say — that $13 billion is advertising money and Google, like Amazon, wants to make money facilitating actual commerce. But the division between advertising and selling is an old one, fast blurring. Think about where we’ve come from the era of impression-based (newspaper, TV, radio, magazine) ads into the era of pay-per-click, pay-per-lead, pay-per-acquisition, and more.

Retailers don’t want to advertise; they want to sell stuff.

Give them new routes to sell stuff, and deliver it more cheaply than they could before, and they’ll migrate their ad/marketing/lead generation dollars. So if Google can really make it easier to personalize, routinize and make more efficient the selling process, it will place itself between the seller and the buyer. As it does that, it replaces the newspaper as middleman, further reducing much of the revenue that is keeping newsrooms staffed, even if many of them are now half-staffed at best.

Is the replacement of newspaper as advertising-oriented middleman inevitable? Probably, but over a longer term. Since the dawn of the web, people have been chasing the perfection of commerce, and it’s been a tough slog with far more losers than winners. Amazon, of course, is the big winner, but with relatively small profits, a paltry $63 million in the last quarter on sales of $10.8 billion. While Amazon is perfecting commerce, it’s got a long way ago. Since it was born in 1994, four years before Google, it has built a one-of-a-kind business on customer obsession and brilliant analytics. Its recommendations engine is ready for the web hall of fame, and its latest foray with Prime membership (“The newsonomics of Amazon’s prime moves“) shows it knows how to build on its foundation.

Google lacks some of Amazon’s core strengths. It’s a mix-and-match technology company, famously trying lots of things and at times more quickly abandoning losers. In commerce, Google is moving forward with a spate of moves. Google OnePass is a restyled content buying system, with some prominent publishers signing on. Add in Google Latitude, Google Local, Google Local Shopping, Google Shopper, Google Tags, and Google Places, all relating to local commerce. Google Offers is gaining steam and is working with publishers on syndicating local daily deals.

There’s an irony to such publisher partnerships, of course. On the one hand, Google is a “partner,” magnifying publisher businesses through its ad and search products. On the other, initiatives such as Google Tomorrow are a potential dagger to newspapers’ jugular. That’s the way of the web world. For Google, or Amazon, or Apple, or Facebook, any new initiative it takes on has its own internal logic. Should another industry — say newspapers — be wounded in the process, it’s just collateral damage. Given the size of these digital behemoths, as they decimate legacy industries, you can almost hear them say, “Sorry, did I sideswipe you? I didn’t feel anything.”

If everyone is a frenemy these days, and Google is taking on Amazon, media companies have to ask: Who is the frenemy of my frenemy?

One last point to ponder about Google Tomorrow. Consider it, in part, a defensive move.

If, in fact, selling and advertising are blurring, Google has to move more in the selling direction. Right now, it’s an ad company, pure and simple. About 97 percent of its revenue comes from advertising (and you thought newspapers relied too much on that revenue source). It has brilliantly moved to expand its digital ad dominance (now taking in about 40 percent of the dollars in the U.S.) by merging its paid search foundation with big acquisitions in display advertising and mobile. Just last week, the feds let it buy AdMeld, an ad optimizer — and Google’s 57th acquisition so far this year. Now, the Doubleclick ad management system offers a singular approach, incorporating in one place display, search and mobile, to the delight — and terror — of publishers and others in and around the ad industry.

The dominance is a sight to behold. Yet as digital innovation continues to disrupt everything in its path, the ad business is vulnerable, with companies, led by Amazon trying to eliminate the cost and friction of finding buyers. So let’s look at the Google Tomorrow battle plan as one aimed at Amazon surely, but with ammo that may hit newspapers as well — and one that may allow Google to find that big, elusive second revenue stream.

Photo of Amazon warehouse by Chris Watt/Scottish Government used under a Creative Commons license.

Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

POSTED     Dec. 8, 2011, noon
SHARE THIS STORY
   
Show comments  
Show tags
 
Join the 15,000 who get the freshest future-of-journalism news in our daily email.
The newsonomics of MLB’s pioneering mobile experience
Running a sports league and running a news operation aren’t the same thing. But there are lessons to be learned from baseball’s success in navigating mobile.
Why The New York Times built a tool for crowdsourced time travel
Madison, a new tool that asks readers to help identify ads in the Times archives, is part of a new open source platform for crowdsourcing built by the company’s R&D Lab.
Opening up the archives: JSTOR wants to tie a library to the news
Its new site JSTOR Daily highlights interesting research and offers background and context on current events.
What to read next
1020
tweets
The newsonomics of the millennial moment
The new wave of news startups is aiming at a younger audience. But do legacy media companies have a chance at earning their attention?
803A mixed bag on apps: What The New York Times learned with NYT Opinion and NYT Now
The two apps were part of the paper’s plan to increase digital subscribers through smaller, targeted offerings. Now, with staff cutbacks on the way, one app is being shuttered and the other is being adjusted.
413The new Vox daily email, explained
The company’s newsletter, Vox Sentences, enters an increasingly crowded inbox. Can concise writing and smart aggregation on the day’s news help expand their audience?
These stories are our most popular on Twitter over the past 30 days.
See all our most recent pieces ➚
Encyclo is our encyclopedia of the future of news, chronicling the key players in journalism’s evolution.
Here are a few of the entries you’ll find in Encyclo.   Get the full Encyclo ➚
Franklin Center
Corporation for Public Broadcasting
Examiner.com
The Dish
MSNBC
Voice Media Group
U.S. News & World Report
Amazon
New York
MediaNews Group
The Weekly Standard
The Daily Telegraph