And if enough of their leading search verticals become big enough for large platforms to emerge and wean away users, they’ll be left with the lowest value search users.
Thus, its venture investments in vertical players—Practo for health, CarDekho for automobiles, Commonfloor for real estate, Cuemath for tuitions. It gives Google a window into verticals, while potentially delivering financial returns as well.
Strong Product Management
Here, Google’s thinking is driven by its strong product management teams. “They’re always thinking and debating, what is the next leg for our product? What will make our products dramatically better in 10 years?” says the founder of a Bangalore startup that has seen these discussions from the inside.
Google understands that its biggest nemesis is Amazon because most monetizable queries are for products. Increasingly, that is something more and more people do on Amazon. For instance, in Q1 2018, Amazon made over $2 billion from advertising!
That said, one venture investor didn’t have too high an opinion of Google’s venture arms. “Their investment deals are very difficult to time and understand because sometimes they are very active and keep making deals, but sometimes they just disappear and don’t do any deals,” he said. He points to examples such as Ridlr, an app to book public transportation. They did due diligence on the company, but it was finally acquired by Ola. “Ridlr actually got in trouble because they were so hopeful that Google is going to buy them that they kind of gave up on doing everything else,” he said.
“Amazon finds it difficult to invest because they’re more of a building company. They’re like, let’s build this, rather than buy. And then, three different teams will build it simultaneously and will compete to win,” says the CEO of a tech startup based in Bangalore.
Difficult to stay affiliated
As a result, Amazon finds it hard to collaborate. It’s in their DNA to build and control.
Add to this the fact that Amazon lost out on two of the largest and most strategic deals—Flipkart and BigBasket—and you’re left with a fairly average portfolio.
Amazon entered India very late. It was 2013 and Flipkart was already the darling of the e-commerce industry; raking in all the money from investors. After five years and investments of nearly Rs 24,000 crore($3.4 billion), it has set-up robust logistics, warehousing, wholesale and retail e-commerce, and payment operations in India.
But despite setting up a large presence through fulfillment centers spread all over India, Amazon wanted to buyout Flipkart’s investors. This was for defensive reasons, to prevent Walmart from getting it, says the co-founder of a technology-focused PE company. It also coveted BigBasket because it wanted repeat customers, he adds.
In 2016, Amazon bought two companies outright. The first was Emvantage, a payments platform with its own payments gateway to building its own payments business before it launched Amazon Pay wallet services in India. Later that year, it scooped up Westland Publications, a Chennai-based publishing firm owned by Tata Group’s retail arm, Trent Limited.
Taking Baby Steps
Amazon has also made small investments in Indian companies, such as home services provider Housejoy, financial products marketplace BankBazaar, digital insurance player Acko, fintech firm ToneTag, and QwikCilver. QwikCilver is an end-to-end gift card solution provider that powers Amazon’s gift card business. Amazon also bought a 5% stake in departmental store chain Shoppers Stop, a public company.
Amazon’s most strategic investment will be in the offline space.
But creating large volume businesses won’t necessarily give Amazon good margins. For that, it needed to expand its presence in fashion. This is where the Shoppers Stop investment comes into play. In return for the investment in the departmental store chain, Amazon got the whole fashion catalog of the company. There would be a separate store on Amazon’s website for Shoppers Stop, and Amazon will eventually install experience centers inside Shoppers Stop stores.