Google Is Challenging Amazon in Voice Commerce

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Once upon a time, Eric Schmidt said that Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) subsidiary Google's biggest competitor isn't Apple, but rather Amazon.com (NASDAQ: AMZN). That might sound counterintuitive, considering the search giant and Mac maker compete fiercely in the smartphone market, but the former executive chairman was referring to the fact that many of Google's most lucrative ads are served alongside queries for when users are shopping for something. That purchase intent is a key driver of the strong click-through rates for those ads, but people are increasingly heading straight to Amazon to buy things, bypassing Google altogether.

With the rise of smart speakers and the nascent market for voice commerce, Google is still looking to keep up with Amazon.

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"OK Google, I want to buy something."

This morning, Google announced a new program called Shopping Actions, a new way for merchants and retailers to sell products directly through Google Assistant and Search. Google integrated e-commerce functionalities into its core Search service in various ways over the years, so that part isn't all that exciting. Rather, the real meat of the announcement is bringing voice commerce to the Google Assistant platform. The company says that 44% of smart speaker users say they order groceries and household items through the embedded virtual assistant at least once per week.

Shopping Actions will integrate across Google services, so items can be added to a universal shopping cart that is shared across Google services, and check out via Google Express with saved payment credentials. Instead of a traditional ad-based model, Google will utilize a pay-per-sale model, so merchants only have to give Google a cut when a sale occurs, instead of having to pay for clicks that don't result in a transaction, which is the standard monetization model for sponsored listings.

All you have to do is ask

Voice commerce is one of the most promising aspects of smart speakers, and an obvious feature for Amazon's Echos. Voicebot released a study earlier this month showing that nearly 50 million U.S. adults now have access to a smart speaker. That study showed that voice commerce is an unexpectedly popular feature, with over a quarter of users having ever made a purchase by voice and 11.5% of users making monthly purchases.

Further justifying Google's announcement, the study found that Google Home users are "surprisingly" 50% more likely to have made a voice purchase than Amazon Echo users. However, Echo still dominates voice commerce overall due to the sheer size of Amazon's Echo installed base.

In no uncertain terms, voice commerce is the newest frontier -- and battleground -- in e-commerce.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of AAPL. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and AAPL. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.