Google Inc.(GOOG) is upping the ante on its online shopping services. For some time now, the Internet search giant has been building its online shopping capabilities. If Google is successful, it could give Internet retailers like Amazon (AMZN) and eBay (EBAY) a hard time.
Google Shopping, as the service is now called, is frequented by customers searching online for products. Products searched on Google automatically have the Google Shopping link at the top, with Amazon and others following. However, retailers and online marketplaces have so far featured quite prominently on Google Shopping as well and this is the service that Google intends to charge for.
Amazon has been making billions from the sales that Google directs to its properties and earlier this year, Google announced its decision to cash in on this opportunity. Therefore, starting October, retailers will have to pay a fee to get featured on Google Shopping. Payment methods and details are scarce as of now, but this could actually be a positive for retailers in the near term.
Google promises to weed out spurious sellers and its advanced algorithms are likely to improve the relevance of searches, effectively bringing the consumers to their purchases sooner.
In the long run however, retailers could be hurt because Google’s comprehensive retail strategy (product search, comparison shopping, reviews and wallet) could soon make it a marketplace unto itself. However, there are other aspects to retail, such as fulfillment, which will neither be easy nor quick for Google to build up. Amazon is far ahead in the race here and eBay will also be way ahead by the time Google starts (if it does at all).
We think that Google has devised a solid strategy to improve monetization of its search technology. Investors are clearly excited at Google’s growth prospects, sending the shares up over 34% in the last three months.
Google retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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