Google Attacking Amazon With Same-day Product Delivery

Google's low-cost Product Search delivery service would challenge Amazon and provide Google with some interesting ad-targeting opportunities down the road.

No doubt many people have read about and have had time to parse the ramifications of Google allegedly (NASDAQ:GOOG) building a rival to Amazon's (NASDAQ:AMZN) Prime two-day shipping service.

Aside from denting Amazon's e-commerce armor, Google could also gain some valuable customer data to target consumers with ads.

The crux is that Google Product Search would offer users the option of paying to have goods they find through the comparison engine from retailers shipped to their homes that same day or the next. Participating retailers for this service could include Gap and Macy's.

This service would mark the next step in luring more users to Product Search, which today lets people compare products and see where they might purchase them nearby. Such a service would challenge Amazon Prime, which lets consumers pay $79 a year for unlimited, free, two-day shipping. The service added thousands of free Amazon Instant Video titles earlier this year.

Analysts see a lot of challenges with this business model. Piper Jaffray analyst Gene Munster noted that a Google delivery service is unlikely to have much of an impact on Amazon's sales.

Munster said in a Dec. 2 research note that while Google might be able to nail the convenience factor of getting goods to consumers quickly, Amazon can offer all the products in a single shopping cart. Google's service would include shopping carts for each retailer, resulting in separate fulfillment and higher shipping costs.

"We believe that if Google wanted to truly compete with Amazon, it would have to offer either some sort of a universal shopping cart to retail partners that would function cross-site or enable users to buy directly from search results," Munster wrote. "For example, you could buy a book, peanut butter, and a jump rope from Amazon, but it would require likely three different retailers if you wanted to purchase them from vendors other than Amazon."

Moreover, Google would have to convince to share a shopping cart/buy page with one another as at that point the only differentiator would be price, which would render brands irrelevant.

Finally, he also believes that if Google were to start down the slope of letting users buy products directly on Google, it would alter the perception of the company. No longer would it be able to claim it's a search and advertising company, but a real e-commerce engine.

This is new territory for Google, and yet, perhaps this is where Google has been moving toward the last year or two. Google has been reaching deeper into Amazon's e-commerce market, offering an online bookstore that competes with Amazon's popular Kindle Store and courting major brands for its Google Offers and Google Wallet mobile payment service.

What better way to attack Amazon's core product sales market than augmenting Product Search? There are other ramifications to such an offering besides the obvious competition with Amazon, eBay and other e-commerce giants.

Forrester analyst Fatemeh Khatibloo said Google could use customer transaction data collected from product shipping to build the first purchase transaction personal data locker. That data could be leverage for--you guessed it--advertising, which is Google's bread and butter.

"Tying actual purchase data to search behavior gives Google a whole new view of the customer behavior cycle, and would measurably improve search algorithms across the board, while improving ad targeting inside a user's other Google Accounts products," Khatibloo wrote in a blog post Dec. 7. "Of course, this is a major win for what's clearly the most important part of Google's business."