Why Google Should buy eBay: Digital Assistant Wars
Last week, Allison Prang reported in The Wall Street Journal that eBay, under pressure from activist investors, is planning a strategic review of its assets, including its classified ad business and StubHub, in order to “drive meaningful shareholder value.” This is code for “we want to sell off a bunch of things in order to create a short-term windfall for investors.” It is the opposite of strategic.
An alternative that would be an even bigger win for shareholders would be for eBay to sell itself to Google.
eBay would be a bargain for Google’s parent company, Alphabet. At the moment of writing, eBay is worth $34 billion. In contrast, Alphabet/Google is worth $799 billion. Alphabet could acquire eBay for less than five percent of its total value. Moreover, Alphabet is sitting on cash reserves of, by one estimate, $102 billion — that’s three eBays.
Why is this is a good idea for Google? Amazon.
The vision for a digital-assistant enabled future is clear: like Jarvis in the Avengers movies, our digital assistants will help us 24/7. In our Internet-of-Things (IoT) connected lives, our digital assistants will remind us when to leave for work and tell us which route to take. They’ll let us know that we need to stop and get milk on the way home from work or seamlessly order it for us and have it delivered straight to the fridge.
When we express interest in a pair of shoes that later go on sale at a nearby store, our digital assistant will let us know… particularly if we are driving by the store and have a few extra minutes. It’s both an alluring and an alarming vision. (See T. Coraghessan Boyle’s recent New Yorker short story, “Asleep at the Wheel,” for one of the alarming versions.)
As we explored in our mini-report, Sharpest Edge: Digital Assistants, the opening shots have fired in an ecosystem war among Google Assistant, Amazon’s Alexa, Apple’s Siri, Samsung’s Bixby, and Microsoft’s Cortana. More competitors are likely to arrive on the field in the near future.
The company that provides a user with her or his digital assistant will be at the center of that person’s life, so this is a high-stakes competition.
Does Google have anything to fear from Alexa? Yes and no.
In January, Amazon revealed that it has sold more than 100 million Alexa-enabled devices, which seems like a big number, but pales in comparison to the more than two billion monthly-active users of Android-enabled devices that Google last reported back in 2017, most of which have the Google Assistant installed by default.
Amazon’s aggressive Alexa marketing strategy and energetic work getting Alexa into cars, appliances and other devices is a savvy response to how many more Google Assistant-enabled devices there are. (Along these lines, I’ve argued elsewhere that Amazon should buy Lyft before its IPO.)
Even though Google Assistant is a giant and Alexa is comparatively tiny, Amazon has an advantage in the ecosystem war: commerce.
Many American users already skip Google and go straight to Amazon for searches about products. With its purchase of Whole Foods and new forays into budget grocery, Amazon has shown that it wants to be at the center of every economic transaction, with groceries being what people buy most frequently. Two key components of Amazon’s strategy are Prime (over half of American households subscribe, according to eMarketer) and Alexa, which is increasingly ubiquitous.
Google cannot allow Amazon’s Alexa to become the go-to digital assistant for commerce without a fight, which is why Google has worked with Kroger to have the Google Assistant power voice commerce with that company’s grocery chains. (It’s also why Walmart’s pulling out of a similar deal was a blow.) Google also has its “Google Express” platform that powers voice-enabled commerce for a surprising number of stores.
That’s a lot of data about a lot of products, but what it lacks is data about customers.
So why buy eBay? The data.
Google has unparalleled insight into what we want to know in general, but Amazon knows what we specifically want to buy. To use Erving Goffman’s term, when we’re on Amazon we are living within a particular identity frame: we’re shoppers and buyers. As users increasingly skip Google when shopping, that means that Google’s insights into our shopping and buying frame are at risk of becoming anemic.
Google could then combine that data with its other search data, inventory data from Google Express, as well as all the personal data coming from the suite of apps many Americans use to organize their lives: calendar, email, word processing, spreadsheets, maps, communications and more… all connected to and by the Google Assistant.
If we take a step back then it becomes clear that the Alphabet/Google digital assistant ecosystem play is much bigger than Amazon’s. On top of everything that Google provides to its users directly (including video from YouTube and other entertainment from Google Play), add in Alphabet’s Waymo and Waze transportation subsidiaries and commerce in real time becomes integrated with ecommerce. As I’ve discussed in a previous column, Waymo wants to integrate with brick-and-mortar retail. Project Wing from Alphabet’s Moonshot Factory wants to create a delivery-by-autonomous-drones service. (Amazon has a similar “Amazon Air” project.)
Perhaps most importantly, if Alphabet/Google buys eBay then by doing so it positions itself as a neutral platform where shoppers can find the goods they want at the best possible price and sellers can compete in a fair marketplace.
Although this may be an uninspiring proposition at first glance, it is a real advantage when compared to Amazon–which privileges its house brands over competing brands and at any moment might create a new house brand to compete with a vendor selling on its platform.
eBay, though, is the big fish… for a mere $34 billion.