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Google's E-Commerce Plans Are in Question as Executive Departures Mount

Is Google prepared to wage the war against Amazon?


A year ago, Google’s commerce initiatives finally seemed to be clicking. Its same-day delivery service, Google Express, was a hit with consumers in San Francisco and its business selling paid product ads in search was, by most accounts, a big success with big retailers.

How quickly things change. In November, Tom Fallows, the architect of Google Express, stunned employees by leaving for a role at Uber. Then, this month, Fallows’s well-regarded boss, Sameer Samat, followed him out the door to become president at Jawbone, the health-tracking device maker.

Now, Google is set to launch perhaps its most critical commerce-related experiment ever: “Buy” buttons on mobile ads, according to multiple sources, which will turn Google into a cross between a search engine and Amazon. (The Wall Street Journal first reported the move.) It’s the latest attempt by Google to remake its search business for a world increasingly spent on mobile devices and dominated by apps like Facebook, Twitter, Instagram and Amazon — none of which Google owns.

The departure of key executives raises questions about Google’s long-term commitment to a real commerce battle as Amazon, Pinterest and a coterie of shopping apps eat away at Google’s lucrative business related to product searches.

“The way to tackle it is to either cannibalize yourself or be cannibalized,” says Staples e-commerce lead Faisal Masud.

Combatting Amazon

For many of its early years, Google was happy with the role it played in online shopping. Online shoppers searching for items on Google often clicked on search ads related to those products. It was a good business.

But as Amazon became the dominant player in U.S. e-commerce over the last few years, Google has suffered. Every time someone goes straight to Amazon’s website or app to buy something, Google loses a potential product-search query and the ad revenue that comes with it.

To help combat this, Google in 2013 launched what is now called Google Express — a shopping service and website where shoppers can order clothing, household items and packaged groceries from local retail stores for delivery that day or the next. The service is available in seven major cities, including San Francisco, New York, Chicago and parts of Los Angeles. Customers pay $10 a month or $95 a year for the service.

The Express project positioned Google as a technologically advanced ally to retailers in their uphill fight against Amazon. But Fallows’s sudden departure for Uber stunned his team and the commerce group at Google on the whole.

“Tom was Google Shopping Express,” a former Google employee said, referring to the same-day delivery service by its original name. “He built it. It was the Tom show.”

People close to Fallows maintain that he did not lose faith in the Shopping Express project. Instead, he was long an admirer of Uber and its mission and viewed the role at Uber as a once-in-a-lifetime opportunity. Nonetheless, his departure raised a red flag among some partner retailers and employees, too.

Executive exits

In the wake of Fallows’s exit, some Google executives feared his team would follow him out the door. That fear was largely unrealized, but a new predicament arose when Samat, his boss, chose to leave for Jawbone. Samat, who has been with Google for more than seven years, was well respected internally and known for getting things done, people who have worked with him said. He was also an executive who presented well in front of retail executives and was generally liked in that industry.

In addition to Shopping Express, Samat also oversaw Google’s travel-related search engine projects and its Product Listing Ads business. PLAs are promoted search results that mimic a standard shopping site page, even including product photos. Scot Wingo, executive chairman of e-commerce software company ChannelAdvisor, estimates that PLAs now account for $5 billion to $8 billion in annual revenue for Google. The product is at the center of the European Union antitrust probe into Google.

But Google is not shelving the business. Instead, it’s putting the shopping ads at the center of a mobile makeover, and when its new purchasing button arrives, it will only appear within PLAs, sources said. Partnering retailers can pick which products they want to advertise with a buy button. By clicking on these shopping-enabled ads, shoppers will be directed to a Google webpage for purchasing. Initially, the buying capability will only work with ads displayed on mobile phones.

A nagging issue for online retailers paying for PLAs is conversion — getting someone who clicked on a product image to complete the purchase. Google is positioning the experiment as a way to help retailers fix that by reducing the number of steps between viewing the ad and completing an order. It arrives shortly after Google introduced a series of ad enhancements inside mobile search in a bid to claim more of the transactions and ad dollars that have gravitated to rivals like Amazon and Facebook.

“Why are people getting off of Google product search?” Masud, the Staples executive, asked rhetorically. “It must be for a reason; the reason is it must not have the best experience. This should be better in many ways.” Masud declined to comment on the buy button initiative related to Staples specifically.

Getting mobile right

Google’s new buy button will have limitations. For one, shoppers may only be able to purchase one type of product at time. This would make it more of a promotional tool than a real Amazon competitor, according to Jason Goldberg, vice president of commerce strategy at digital ad agency Razorfish. What’s more, online retailers that sell modestly-priced products don’t love single-item orders, since shipping fees eat deeper into their margins than if multiple products are being shipped.

“I don’t think anyone knows if this will work, but I don’t think Google is going to stop if this first experiment fails,” one source familiar with the project said. “Google has to get this right on mobile.”

Google also seems intent on getting Google Express right. Multiple people say Google’s leadership team is still supporting the initiative, but it’s not clear how long that commitment will last. Re/code previously reported that the company was earmarking as much as $500 million for the project.

Google introduced an Amazon Prime-like subscription business for Google Express in the fall, but it’s too early to tell whether that model will do well enough to make the delivery business self-sustainable. In addition to Amazon, Shopping Express faces competition from several venture-backed delivery startups, including Instacart and Deliv.

​”I’m pleased with how Google Express has been growing recently, from new cities to a popular pricing model to the addition of new merchants,” Sridhar Ramaswamy, Google’s SVP of ads and commerce, said in an emailed statement. “And we’re lucky to have a deep bench of leaders in our Shopping and Commerce teams who are doing a great job driving our products forward.”

Jonathan Alferness, a VP and veteran of Google’s mobile ad businesses, will soon step into Samat’s role, according to a person familiar with the decision. Shopping Express is now being run by Victoria Ransom, an entrepreneur who joined Google in 2012 when the company acquired her social-marketing business Wildfire.

“Google executive leadership at the top really loves the product and really, really wants it to be successful,” one source said. “But the jury’s still out on if it will be.”

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