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Amazon Is Hitting Google Where It Hurts

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Forget the tablet wars. Google is losing a very valuable search segment to Amazon.

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MINYANVILLE ORIGINAL Don't look now, but the brainiacs at Google (GOOG) have made a big stinking mess out of their site's shopping search results.

Seriously. Don't look now, because they're working on it. But they've got their work cut out for them if they want to stop their company from continuing to lose share of the lucrative market for shopping-related searches to Amazon (AMZN). The 2012 holiday season ought to be a critical test for both companies.

This is a big hole in Google's dominance of the online search industry. Consumers increasingly are going straight to Amazon to search for products, on the pretty fair assumption that, whatever they want, Amazon's got it.

According to a report released by Forrester Research in late July, about 30% of shoppers at least started their last online purchase by searching on Amazon, compared with 13% who turned first to Google. Only three years before, just 18% started their searches on Amazon, while nearly 25% used Google first.

The financial implications are clear: Google is bleeding share of the audience its advertisers want most -- those who are actively looking to buy what they're selling.

In response, Google is again trying to improve its Google Shopping section. If you didn't know Google had a shopping section, you're not alone. This sad backwater, initially called Froogle and later Google Product Search, is buried under the "More" pull-down tab on the home page. The Forrester report does not distinguish between main page searches and searches within this sub-section, but it's a good bet that few people stumble into Google Shopping.

If they find it now, and look for the tiny gray type at the bottom of the page, they'll discover that "Google is compensated by some of these merchants."

Charging Merchants May Backfire

That's the only clue to the first big change: Google has decided to start charging merchants for inclusion in the search results. The company says it is doing so only to clear out low-quality matches poured in by merchants who were taking advantage of the free exposure but not taking responsibility for the quality of their entries.

That may be true, but it is seriously messing with Google's reputation for strict separation of search results and paid placement advertising. For that matter, how does a search engine justify limiting the breadth of its search?

Moreover, it means that the main Google Search page, which retains that editorial integrity, is a much better place to go shopping than the Google Shopping page. To understand that, you have to know that Amazon is among the companies that so far has declined to pay for exposure in Google Shopping.
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