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Friday, September 26, 2003
Amazon creates a search engine division to compete with Google. This group's strategy is to focus on e-commerce search. Will they be able to outcompete Google? I doubt it, since I always thought Amazon would eventually have to buy into Google's technology (and they did).
Is this a decent tactical move? Well, it's time that Google faced some serious competition. It also lets Amazon extend and stretch one of it's most underperforming resources. But ultimately I don't think that search is a core competence that Amazon needs to sustain it's advantage. Rather, Amazon's advantage is built around selection, personalization, flexibility, and reliability. So in the end I suspect that this is the wrong kind of resource-building: Amazon would be, I think, better off innovating to directly influence the competencies above.
Of course, this tactic is part of a larger strategy - the shift to a 'services' firm, where Amazon sell's it technology platform. It's technology will largely allow firms who don't already have them to build the competencies mentioned above (which are great competencies to have). I don't see why buyers wouldn't still buy Google's search platform, unless Amazon's technology can offer them some kind of radical innovation - which is pretty hard to imagine just now. So adding a search resource to such a strategy doesn't add much - Amazon platform proposition is already well-differentiated and compelling enough without it.
The article also claims that Google's revenues are expected to be close to $1 billion this year. I find that *very* hard to believe. My gut estimate is in the low hundred millions.
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