Google Copies Amazon’s Playbook

May 23, 2013, 4:56 p.m. ET

Google Copies Amazon’s Playbook

By GREG BENSINGER And AMIR EFRATI

SAN FRANCISCO—Google Inc. GOOG -0.75% co-founders Larry Page and Sergey Brin say they don’t pay much attention to rivals. But the search company increasingly appears to be following Amazon.com Inc.’s AMZN -0.44% lead.

The latest example involves cable ties, AC-DC adapters, radiation detectors and the like. In April of last year, Amazon rolled out AmazonSupply, an e-commerce site featuring such industrial goods. Google followed suit this January, testing Google Shopping for Suppliers, which also helps shoppers find items tailored for businesses.

Both sites represent a relatively new foray for the technology companies—business-to-business sales—though Google’s doesn’t sell the items directly and its service is limited to suppliers of certain types of electrical equipment.Industrial goods isn’t the only arena in which the Mountain View, Calif., Internet-search company has followed Amazon recently. In the past year alone, Google has started at least three other services that take aim at Amazon operations, including corporate computing, same-day delivery and offering lockers for consumers to receive e-commerce orders.

Both companies are encroaching onto the turf of other rivals, as well. Google in 2011 unveiled social-networking service Google+ to take on Facebook Inc. FB -0.39% And Google and Amazon both have entered the tablet-computing market, aiming to duplicate Apple Inc.’s AAPL +0.18% success.

But the way Google has copied Amazon stands out for how often it has occurred and for the wide variety of sectors in which the companies are competing.

At least two of the Google initiatives were spurred by previous moves by Amazon, people briefed on Google’s plans says.

The pull for Google could be the expanding pie for e-commerce sales, which is expected to grow an average 9% a year through 2017, to $370 billion, according to Forrester Research. Amazon, meanwhile, has been growing rapidly, with first-quarter sales rising 18% from a year earlier to $13.3 billion.

“Competition is great for users,” a Google spokesman says, “and is giving lots of businesses, like retailers, a variety of options.”

Amazon declined to comment.

“More and more customers are using Amazon, and Google is rightly concerned,” says Alfred Lin, a venture capitalist at Sequoia Capital who had been an executive with Amazon shoe seller Zappos.com. “Those two companies are going to duke it out for a long time in just about everything.”

Google’s moves to copy Amazon underscore how the tech companies are expanding into each other’s areas—each trying to be the primary Web destination shoppers. As the two battle it out, each increasingly has assumed some characteristics of the other, with Amazon stretching into Google’s realms of online advertising, video streaming, applications and devices such as smartphones and tablets. Rather than develop its own mobile operating system, though, Amazon relies on a version of Google’s Android software for the Kindle Fire line of tablets.

Amazon is also, according to people familiar with the company’s plans, readying a broad range of devices that, in some cases, borrow from Google’s previous efforts. Amazon is developing two smartphones, an audio-only streaming device and a set-top box, said the people. Google has launched several branded handsets and video and audio streaming devices in recent years.

Amazon is a particular threat to Google because of the Seattle-based company’s dominance in e-commerce and product searches. Amazon handles three to seven times as many product-related searches as Google Shopping does, according to research firm comScore Inc. SCOR +0.76% (That comparison doesn’t include product searches on Google’s main search engine, which places links to Google Shopping at the top of the search-results page whenever a person does a product search.) Yet Google managers have said that the company’s most important slice of ad revenue, which totaled more than $43 billion last year, comes from selling space next to product-related search results.

“Everybody wants to be that initiation point of commerce, and Amazon has been winning,” says Doug Alexander, who sold e-commerce consulting firm Channel Intelligence to Google for $125 million in March. Google is trying to “figure out where Amazon is skating to,” he says, and “thinking globally in places where Amazon doesn’t compete.”

Messrs. Page and Brin have said that Google follows its own route. Mr. Page, the company’s chief executive, said recently that focusing on competitors can lead companies to “decay” because they concentrate on incremental improvement rather than big, risky bets that can offer a bigger payout.

During a speech last week, Mr. Page lamented press reports about Google’s competition versus other companies. “I don’t find that interesting,” he said, adding that “most things are not zero sum,” meaning that multiple competitors can do well in any area. “There’s a lot of opportunity there.”

Last June, Google began ramping up its pursuit of Amazon by unveiling Google Compute Engine, a cloud-computing competitor to Amazon Web Services.

The Amazon service, which offers businesses computer storage space and number crunching, made its debut in 2006 and is by some estimates a roughly $2 billion annual business. Amazon Web Services’ clients include Netflix Inc. NFLX -1.04% and Pinterest Inc.

Inside Google, Compute Engine was considered a “defensive” move against Amazon Web Services, according to a person familiar with the deliberations that led to the introduction of Google’s service.

Then last November, Google bought BufferBox, a Canadian company that offers lockers for people to take delivery of items bought online when the consumers are away from home. Google last month installed the first U.S. BufferBox locker, in San Francisco. Amazon has been installing similar lockers in malls and convenience stores in such cities as Seattle, New York and San Francisco since 2011.

After Google’s January rollout of Shopping for Suppliers, the company in March took the wraps off Shopping Express, which allows customers of Google Shopping to get orders delivered the same day.

People briefed on the project, which was two years in the making, say it was partly motivated by Amazon’s success in offering two-day delivery, through its Amazon Prime, service and same-day delivery, which has been available for four years in some cities.

John Sheehan, the 31-year-old co-founder of a San Francisco software startup, says he will use Google Shopping Express for 10% to 20% of the purchases he would otherwise make through Amazon, which only offers two-day shipping in the city.

“If prices were comparable between the services and one had same-day [delivery] and one didn’t,” he says, “I’m going with the same-day one every time.”