Vertical strategy for search engines

6 min readMay 2, 2019

This topic is a bit dated as the verdict is already out. Nevertheless..

When we think of search engines (Google, Bing, Yahoo) we primarily think of them as tools for getting information and navigating to sites where we can transact. These companies make money by showing relevant ads for queries from advertisers. Some of these advertisers would have asked themselves — will Google become my competitor at a point in future.

Will Google be a jobsite ? Will it be an e-commerce site or a price comparison site ? Will it be a ticket booking site or flight booking site etc. ?

The answer is — they are a bit of all of these and might be thinking of offering deeper task completion scenarios in more verticals. How will they be thinking about this ?

The cash cow

While Alphabet has bets across the spectrum of promising technologies, Google’s bread and butter is still Ad revenue(85% of total revenue) .
As a product monetizing through ads, you are basically selling the time that your user has spent using your product and the data that she has shared with you. (indirectly of course)
To defend this cash cow, they have to make sure that user’s primary source of information(and top of mind) remains google in each of these verticals.

Ad revenues follow user’s attention!

Who is taking the pie

As internet users, we know that we have been spending more time in social networks (FB, Instagram, WhatsApp) for leisure. FB already takes around 30% of digital ad spend in US.
YouTube is the closest Google has in this space(leisure). Facebook videos are catching up in terms of viewership and marketers can probably target better using FB.

Vertical players taking away user’s attention

55% of retail searches in the US start in Amazon and not Google. Amazon was able to offer a better product search experience and this has resulted in users going back to Amazon again and again for retail products.
Retail is a big pie of ad revenue and Google has already seen erosion of user’s mindshare in this vertical. Amazon is still capturing ad revenues in this vertical. They also know users’ purchase preference much more than any other ad network.
Google went deeper in this space and launched the ‘shopping tab’ which is similar to a price comparison site.
It went even deeper into allowing the transaction to be done through Google express.
This helps users compare products across different retailers and even complete checkout within Google
This also helps smaller retailers as they see Google providing better conversions
Is this really helping Google ? We don't know yet.
What about other verticals — for example booking movie tickets ?

Device shift and task completion

Google was able to dominate the device shift from desktop computers to smartphones. Android holds more than 80% market share.
It was also able to capture the browser market through chrome (60% share)
What is the next trend here ?
Smart speakers and digital assistants — There are two things to do here (1) grab as much land as possible (2) provide as many services as possible through this new paradigm
From voice based assistants, what users expect is task completion and not a list of blue links. They want to say ‘assistant, buy groceries for me’ not ‘show the list of grocery shops near me’
Building capabilities for task completion becomes important if Google wants to dominate this device and this interaction paradigm
Even further in the future with AI based robots, hologram displays, virtual reality etc. we expect users to get comfortable offloading their cognitive load of searching and deciding to their favorite AI assistant. They would want to say ‘Jarvis — book my tickets to New York for the conference’ and expect Jarvis to know and decide everything else

What are the tradeoffs ?

All the above arguments say that Google needs to become an app that offers all known services end to end. Now what are the tradeoffs

Customer reaction: Let’s say google starts offering flight booking in google itself. In each market, there will be few players offering flight booking and customer support. They might now consider google as a competitor and reduce their ad spend on google. (This was not the case with online retail. After Amazon, the other players were fragmented with a bunch of them focusing on niche domains)
Capabilities to offer such a service:Some of these services are customer support/ops heavy and Google might not be able to manage that
Two sided marketplaces: Some of these services are two sided marketplaces. For example — classifieds, vacation rentals etc. While google will be able to generate demand, cracking the supply side at scale across geographies will prove to be difficult
Aggregators: Some verticals are dominated by aggregators who offer discovery service just like Google. It is very easy for Google to replace these aggregators. Aggregators can react aggressively and in markets like EU result in law suits and fines
Margins: Some transactions give relatively higher margins than others. While competitive bidding helps in capturing some of this as CPC-s it might be tempting to capture all of it by cutting the middle men

What is the verdict ?

No doubt that Google needs to offer richer experiences across verticals and get to a point where users can complete transactions in Google.
It will adopt one among multiple strategies for each vertical in each geography: (a) offer end to end transaction (b) offer rich experiences for narrowing the decision journey and partner with providers for end transaction (c) offer blue links

Applying this framework to ticket booking in entertainment vertical

This is a reasonably big vertical with billions of dollars in transaction volume in US
There are few dominant players in each geography who have entrenched relationships with movie halls and other entertainment businesses.
While Google will be able to build the software required to manage ticket bookings, it will be quite difficult for Google to replicate the vendor relationships at scale across geographies. The middlemen here offer good value add in the ecosystem

The best approach for Google is to offer a rich experience for users to search, explore and decide on what to book — and then offer the booking experience in the partner's portal