Growing Ecommerce – The Retail Growth Podcast

Is AI Shattering Google’s Fortress? Plus: Inside Amazon’s Risky Ads Test

• Smarter Ecommerce • Season 4 • Episode 7

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Is AI a wolf in sheep’s clothing for Google's empire? Mike Ryan and Christian Scharmueller are back to spill the tea on the biggest players in ecommerce! 

This week they're dissecting Google's "fortress" of a business and Meta's uncanny ability to sell us things we didn't even know we needed. Our hosts will also dive into the mysterious case of Amazon's Google Shopping Ads blackout and try to figure out if it was a secret negotiation tactic or just a costly mistake. 

Plus: Chris and Mike are checking out how JD.com is making bold moves in Europe with unexpected partners like IKEA and Media Markt. 

Grab a coffee and join the chaos! And if you don't want to miss our next unfiltered take on the industry, hit that subscribe button.



About smec (Smarter Ecommerce):

At smec - Smarter Ecommerce, we specialize in transforming business goals into optimized ad campaigns. With over 16 years of experience in Google & Microsoft Ads, our intelligent software and expert services help retailers achieve superior results.

We're committed to giving you the tools and insights needed to stay ahead in the ever-evolving world of digital advertising.

Make sure to follow smec - Smarter Ecommerce for more performance marketing insights:

Speaker 1:

Welcome to another episode of Growing E-Commerce. We are your hosts Mike Ryan, head of E-Commerce Insights at Smart E-Commerce, and Christian.

Speaker 2:

Chamula, chief Client Officer. Always a pleasure mate.

Speaker 1:

Good to be back. It's been a minute but we're going to. We want to get a few episodes together and, yeah, we're going to have fun and take it one thing at a time, right 100%.

Speaker 2:

I missed your voice. I love the instrument. Your voice is. I missed it. By the way, mike, I want to officially apologize for my rather underwhelming setup today, but we're moving to a new place and I just couldn't find a fitting suit. Maybe I will still be underdressed the next episode, but the next, after next, I will be back again.

Speaker 1:

For listeners and for anyone joining us newly. Chris usually wears like a shiny three-piece suit. Um and uh, his, if you can picture, if you know alicia silverstone's closet in the movie clueless, and I think now ai finally caught up where you can have it. Plan your outfit for you. I'm deeply sorry, mike, but so that's the kind of setup, setup that Chris has at home that he needs to rebuild.

Speaker 2:

For special events. Man. I always, you know I really lift the principle when in doubt, overdress Absolutely. I wanted to overdress today but I just couldn't.

Speaker 1:

Well, I think you know we're going to talk about some market topics, some earnings-related topics. So it's a pity that you don't look like Mr Monopoly himself, but we'll have to make do. Why don't you bring us in, chris? There have been you know, the earnings are all in. Also, like now, a lot of retailers have done their earnings. The platforms had their earnings a bit earlier. But let's go back and talk about a couple of highlights from there.

Speaker 2:

I think, given the fact that we are talking about growing e-commerce, I think Google and Meta would be two companies to look at a bit more closely, because they are probably the e-commerce companies next to Amazon. And what I found very interesting and that's why I'm following these earnings calls very closely, especially the last I, I would say 12 months, because, uh, I think we are in in in highly disruptive times. Of course, ai plays a big, big role here, but what's also very, very disruptive is, uh, and you know, we have roughly 400 clients and we know that a lot of clients struggle right now, right especially e-commerce clients. Why paper thin margins, demand issues and so forth. And when you look at these big, big, mega cap companies, uh, I think they are doing better than ever. Yeah, so this consolidation of of, of margin of revenue, is in full swing right now and I think, next to AI, this is another big disruption. We're looking at that.

Speaker 2:

The world economy might be struggling, but if you look at these, you know, let's say, magnificent, it's crazy what they do. And to talk about Google, for instance, right now, I mean, I just noted down some numbers Q2 earnings almost 100 billion in revenue Okay, fine, rather a huge number no one really can cope with, but it's a 14% year-over-year increase. A 14% year-over-year increase at this level. This alone is just crazy to me. And what's very, very interesting Mike and we talked about this that Google might be facing, the first time in the history, real competition, especially in the field of search, which is their core business. And if you look at and if you do some research and you look at the Google search revenue numbers, they are still growing strongly. Q2 earnings call 12% year-over-year growth, roughly 55 billion in revenue. So wherever the competition might be and we talked about that and you know my stance I also think that Google might face some competition. But looking at the numbers, currently there's no competition at all. At least it's not materializing in any downwards trend for Google whatsoever.

Speaker 2:

And another thing which is really, from my perspective, absolutely crazy, because I thought that Google is also somehow late to the party and especially AWS is just knocking out of the park. But if you look at the cloud numbers, it's red hot 30% year-over-year growth and year-to-date the operating margin almost doubled. Looking at the cloud business, so they are hyperscaling and they print money like no one else. So Google a fucking fortress. It's amazing what they do, and I think they also solved the AI game. This was the one big topic how can they monetize it? Is AI eating the lunch of their core business? And we talk about that in a minute? I just don't see it so. Highly, highly impressive, yeah.

Speaker 1:

No, I mean, I can only agree with you there. It's kind of, you know, a narrative violation, as they say. Everyone's saying that Google's threatened here, but the numbers don't show anything like that and I think in some ways, it's still early to say these AI challengers, like OpenAI Perplexity, is launching their own browser. Now we have to see how. It's still early days for them, but I just have always felt that there's an extent to which this is just not a zero-sum game. And also I think we've talked about this before you have to talk about, like search is such a huge place, like all of these informational queries that cannot be monetized, that are actually just there. And then there's this core commercially relevant area. So they're for sure holding their ground in this commercially relevant battle ground and we'll have to see what comes next. But yeah, I mean, it's pretty stunning. Like you said, what was it? 14% growth? I mean that they're so big and they can still put up a number like that is insane.

Speaker 2:

It's really, and you know how hard it is to grow double digit. I mean, we know as a company we're doing quite well, but growing double digit in this economic environment, let's say for the last one and a half, two, three years. And they do it quite easily, as it seems, and like the one thing which is, for me, the probably the most stunning thing is because you're like um, ai search. This is not a zero-sum game, but even if it was, google is absolutely fine, because what we see is that, uh and this, this is, I think, the one crazy step. A lot of people got wrong, because the hypothesis is that ai and competitors are eating away from the search query more or less launched from Google. Right, something will migrate to ChatGPT, others Perpaxi and so forth, but the stats are pretty clear. 90% of all global search queries are still with Google. By the way, do you know how many global search queries happen yearly? Google plus everyone else, the whole thing.

Speaker 1:

I mean Google claims like 5 trillion.

Speaker 2:

Yeah, it's 5.9 trillion and 5.3 trillion that's crazy 190,000 search queries per second.

Speaker 2:

But the more important thing and we talked about this, mike is that this global search queries yes, it's an indication, it's fine, but it's about the commercially intended search queries and their 90% belongs to Google still, and it's not moving. This is the thing. It's not moving. So, and as long as that's stable and the click prices went up a bit and Google is just fine in their core business, this is the one thing which I think a lot of people overestimated how fast a disruption can happen, by the way, me included. But looking at that, it's just fine. It's just fine.

Speaker 1:

I'll just say one last word, which is you're talking about their AI capabilities, because BARD was kind of a joke at first, and then Gemini also fell flat and everyone was like, well, where's Google? I thought Google, yeah, and now they really are, you know.

Speaker 1:

Click on all cylinders, yeah 2.5 Pro on Gemini is awesome. They have a brand new image model which is looks to be better than SachiPT's image model and, by the way, it seems like it's great for backgrounds and stuff like that and putting clothes on models for e-com. There's all kinds of use cases, so they're just really where they, in my opinion, belong, which is at the front.

Speaker 2:

Yeah, and what Google does so greatly from my perspective is it's so seamlessly embedded in the way you work with Google. Gemini is just fitting in, by the way. A number which also was very surprising to me is the Gemini app has now roughly 450 to 500 million daily active users. Wow, chatgpd is running at around 750 to 800 million, but they started probably one and a half years earlier.

Speaker 1:

Oh yeah, the head start is vanishing.

Speaker 2:

So, yeah, google is just fine. And if you take the last thing into account because the whole AI game and then we talk about, I think, in the next episode about is the whole AI thing rather a bubble or real business I know what stance you have on it, but we'll talk about that but when you look at this AI game, it really turned into a CapEx game. Right, you have to massively invest to develop your AI capabilities and, let's face it, google sits on roughly 70 billion in net cash yes.

Speaker 2:

And they have an operating margin, net profit share of roughly 30%. So they're printing money. There's a big will to invest and I think now they have the right strategy where to invest the money. So I just I just see Google. It's an untouchable company, as it seems. Let's see in September story for another day, but in.

Speaker 1:

September they start the remedy phase of the DOJ trials.

Speaker 2:

Let's see, this is the one. You're right, this is the one thing.

Speaker 1:

Let's see what will happen with Chrome, but I agree they're in a solid position. Tell us, chris, what you made of Meta. Then Meta.

Speaker 2:

Meta is an interesting company. On a private note, I thought about investing in Meta roughly mid late 22 because there was this somehow big correction yeah, and I didn't, so never listen to me, and that's why you still work here. Yeah, that's why I'm still having a podcast.

Speaker 1:

That's why you're on this podcast right now. Thank God he didn't. Ladies and gentlemen, we wouldn't be having this conversation.

Speaker 2:

I love being here, but I mean just to put it in perspective. Late 22, facebook was at around $100 a share. Now they are. What is it? $700, $750?

Speaker 1:

And, by the way, reality Labs is still around and it's still a major anchor dragging on the company Exactly.

Speaker 2:

But let that sink in. Yeah, and the stock is just doing fine. And if you look at the numbers as they are in last earnings call, it's a fucking powerhouse. I mean, it's a well-oiled advertising machine. And this is the one thing. What I don't like about Nida. Last earnings call. I mean again some numbers 47 billion in revenue 22% increase year over year. Operating income 20 billion, which is 38% up year over year.

Speaker 2:

So it's the scale the scale, it turned more profitable. But what I just and this is probably why I'm also to a certain degree happy that I didn't invest, because this hypocrite sucker bird is I mean, we talked about in one of our episodes right Advertising is nothing he's interested in, it's one department. He stops by once a year and what?

Speaker 1:

was it? I bet it was about 90%, 97%, 97% 97% of earnings.

Speaker 2:

And this is what, by the way, this is what Mefe is. From my perspective, it's a well-oiled advertising machine. Yeah, fair play to them, right, but then to talk about advertising is something I'm not interested in. So, yeah, look, the numbers are absolutely great, I think, pretty, pretty comparable to google. They, they, they are in a position to scale, to grow without any, any, any, any downwards trend in the operating. Much and quite the contrary is happening, and and this is a golden path to be on.

Speaker 1:

So hats off to them for sure and I mean, if we get back to these themes of ai and this well-oiled machine and ads, I think this is an area where, um, they are making a pretty compelling position, uh, especially even compared to Google. Like, google is pushing AI in their ads a lot too, but I don't think they've been as effective in showing how good this is for advertisers. But, like now, meta has been investing heavily in this new Andromeda model and it seems to be very impressive. They're attributing I mean I've laughed at this before because of the huge amount of complexity that it introduces in terms of, like, the size of the model and everything but it's bringing conversion lifts. According to the earnings statements I think it was like I can't remember which was which 3% on Facebook and 5% on Instagram or vice versa, but these were the numbers and that's just like for media and advertising. That might not sound like a huge amount, but it's already a mature channel. They're pulling this out of somewhere.

Speaker 2:

This is highly impressive because that incrementality for it's just huge what they are doing there.

Speaker 2:

And, by the way, one thing because if you compare Meta to Google, there's something I was concerned about when we talked about Google a couple of months ago that this disruption of AI is probably more hurting to the Google core business than to Meta's.

Speaker 2:

Although Google is managing it extremely well, I still think that Meta's business is somehow more potentially more unaffected by any negative AI trends or disruptive technology, and the reason is it's a well-oiled advertising machine. But the utility of Meta is still very much on an emotional basis and Google is rather functional utility. Right, you look for something, you search, and I think AI will disrupt this functional utility way more than an emotional utility. At least, it will take longer to really be highly disruptive with these emotions between human beings. And that's where Meta sits. And I think quite impressive is that, because we talked about the 90% global search share belongs to Google. I think 7 if you exclude China. I think roughly 70% or even more 70% of all daily active users, like in the internet, belong to Meta or are on one of the family app of Meta.

Speaker 2:

That's insane 70%, that's what they own, yeah, and so they are also well positioned from my perspective. They have network effects in full swing. The switching costs, like no one is going away from from from one of the apps of of meta yeah, the switching costs are high. They have process power.

Speaker 1:

I think they understand their customers better than any other platform, so, yeah, great company yeah, definitely I, I mean, I think think that, with you talking about this emotional connection on to like, it's the social part of social media and I mean, I'd argue that that has diminished a little bit over time as these feeds have become less about like seeing content from people you know and more about seeing content from people you follow. Yes, or at least yeah, algorithmically recommended um posts and so forth. But it is like I think marketplaces are going to come under pressure. I think search engines can come under a certain amount of pressure, um, but social media does seem to be a different category that'll be less affected.

Speaker 1:

You know, the question will be if there's all kinds of synthetic content content out there. We've talked about synthetic users on this podcast in the past. What kind of implications will these have? But um it, all signs are positive right now on instagram, even recently, they're they're testing, like um, an automatic scroll feature so you don't even have to use your thumb anymore to go through your instagram feed.

Speaker 1:

They've got that covered for you. I'm sure they'll. They'll take their time to linger on those ads, the ad unit. They're not going to swipe right past. They'll take their time, chris. But yeah, I mean, it's definitely in a relatively sheltered or less exposed area to AI and it stands more to just catch the tailwinds and fewer headwinds. I think yes.

Speaker 2:

And I think, like with Google, I mean meta, I mean the family of apps they either developed or bought. They are way, way, way too big to fill.

Speaker 1:

Yeah.

Speaker 2:

I mean, like I said, I looked it up there are 5.6 billion daily worldwide internet users and 3.4 billion active users within the family of apps belonging to me.

Speaker 1:

That's wild.

Speaker 2:

This is wild and, like I said, I think, hats off to them, because I think that the switch in the business model from being just this fancy social platform, this transformation to a well-oiled advertising machine yeah, that happened internally. They never advertised it like this. Zuckerberg is fighting hard to do the opposite. He's not interested in advertising, but that's what they did and I think I really think they understand the customer probably better than any other platform and that's why the ad business is running so, so smoothly for them yeah, um, I agree and I'll just.

Speaker 1:

I just want to wrap up with one more thought. Like we're talking about how strong google has become, including on image generation, which can be super relevant for ecom um, meta's answer on that side, they are not as strong on this, but, um, you were mentioning the family of apps and all the apps that they've built or bought, and nowadays that practice of buying startups is a lot more under scrutiny by regulators, and especially in this AI space, the companies are hesitant to draw scrutiny, so they're rather doing partnerships, and we see that Meta has just started a licensing partnership with Midjourney and this will be their answer to Google's home-brewed image generation tech for e-comm and other use cases. It'll be Midjourney and, all likelihood, powering these e-comm image AI, image generation on Meta's platform.

Speaker 2:

And I like the strategy honestly.

Speaker 1:

It's smart. It's definitely smart.

Speaker 2:

So bottom line, Meta and Google, they're doing fine and they will probably have some more good earnings calls. They're going to keep on doing fine. They are going to.

Speaker 1:

So you can all lay down your head on your pillow tonight and you know you don lose any sleep over meta.

Speaker 2:

Whoever is invested in Google and in meta, you will do fine.

Speaker 1:

Yeah Well, there's another kind of elephant in the room here, but we're not going to talk about their stock, let's talk about Amazon. But in this case we want to talk about a recent I don't know how to describe this a recent thing that happened with them A huge blip in their advertising. We've previously, on this podcast, talked about a major advertising stop in the US by Timu, which was presumably motivated by this whole tariff and de minimis situation in the US de minimis situation in the U S um. But Amazon also had an ad stop, a total ad stop, and it wasn't for Google shopping, it wasn't just in the U S either, it was worldwide, um, and it was totally weird.

Speaker 2:

It's weird. Yeah, yeah, it's weird.

Speaker 1:

Um, I mean, what about the reasons mate, the reasons um? I?

Speaker 2:

don't have a chance to talk to Jeff basis.

Speaker 1:

Uh, no, no, Jeff was uh still on his honeymoon.

Speaker 2:

Yeah.

Speaker 1:

Um, no, but I mean it's really hard to understand the reasons why, without hearing a word from Amazon or perhaps google. Um, but basically, to just quickly summarize what happened, amazon turned off. It actually seems like they they removed, or like they, yeah, they stopped their merchant center because they they not only didn't appear in google shopping ads, but they also didn't appear in free listings either, um, these unpaid free listings that are based on their feed. So it seems like they just took their feed out. I don't know what. They shut down the whole thing, which is a really unusual behavior.

Speaker 1:

It's a big move. Yeah, it is a big move. They're certainly the biggest single spender on Google Shopping and I would say it's one of their larger advertising investments. Um, and you know, they kept running text ads. They were running on other platforms, just not Google shopping. So, um, in terms of why they would do that, by the way, it lasted for a month to the day, it was from July 22nd to August 22nd and we don't know exactly. The leading theory, I would say the most common theory and I don't necessarily agree with it is that it was a marketing incrementality test, just this big on-off test to see what would happen to their overall sales volume without Google Shopping. I don't find that credible. Me neither. It's just. It seems like a dumb way to do an incrementality test yes yes, it's just so.

Speaker 1:

brute force, yes, and I also think that Amazon has been spending such a large sum on shopping for so many years that they've had every opportunity to test this. By now, they can run meaningful tests on a small percentage of their traffic and get conclusive results. A small percentage of their traffic and get conclusive results.

Speaker 2:

Incrementality the test is I mean. By the way, I love to talk about potential reasons because it's just fun. Yeah, at the end of the day, it doesn't matter. They are back in most of the international countries.

Speaker 1:

Everywhere, but yeah, all in the US. Yeah, everywhere in the world, but the US, from what I can tell.

Speaker 2:

But talking about incrementality testing, imagine you're the senior vice president of paid advertising at Amazon. If I wanted to do an incrementality test, I probably would pick one or two representative markets and test it there, but I would certainly not shut down the probably biggest acquisition channel, which is shopping for them in all countries. The risk which is I mean you know how, it is right you pause a campaign for one month. Basically, google learns from scratch again. Yeah, uh, so the incremental test is? It just doesn't make sense at all. Uh, for me, um, but what? What might be interesting and maybe give me a take on this? One thing is for sure Amazon is the biggest spender in Google. We know that the average CPCs increased quite substantially across, let's say, several industries Also highlighted as part of the earnings calls from Google. What about having just a brute negotiation tactic Just to say, look, guys, we can do this, let's see.

Speaker 1:

It's certainly possible that it was a negotiation tactic or a warning sign of some kind. They're also ad tech rivals. They're rivals in many regards and in the past this was several years ago, but they did take measures like this before. I mean, when we've seen them turn off advertising or even reduce advertising in the past. That we know of one time was a negotiation tactic At least that's what was believed at the time and another was in the pandemic and they had at least that's what was believed at the time and another was in the pandemic and they had supply chain, or rather there was too much demand coming through and they they couldn't, they didn't need the channels they actually had to cool things down um.

Speaker 1:

So it's possible that they've once again used this as negotiating tactic with google and to negotiate what?

Speaker 2:

because can you negotiate? A click Because it gets interesting, right? If it's really a negotiation tactic, what are they negotiating? Because the CPC shouldn't be on the table for negotiations, right?

Speaker 1:

True, it should be set by competition in the market.

Speaker 2:

Competition and transparent auction dynamics.

Speaker 1:

Yeah, we know that Google hasn't always treated Amazon like other advertisers. True From DOJ disclosures. Yeah, we know that Google hasn't always treated Amazon like other advertisers. True From DOJ disclosures, it was revealed that they were purposely disadvantaging Amazon in some cases, but I'm not sure exactly. There's been talk about them manipulating or coming to agreements. Also, eBay in the past. These discussions have come to light that eBay had conversations with Google about their organic rankings and you never know what's going on. Yeah, you never know.

Speaker 2:

I mean one thing, let's say negotiation tactic one, incremental testing another potential reason, but I think that's off the table. Another thing I was thinking about because I had a look at the balance sheet and the earnings call of Amazon, by the way, also a very, very solid one Retail media.

Speaker 2:

So Amazon ads take up almost 10% of the world revenue roughly 16 billion in the last quarter and what I was thinking about is I mean Amazon used shopping or Google as a trillion horse to basically lure people in. They paid for it, but they had a business model behind it because a lot of people probably stuck to Amazon and initiated the next church directly on Amazon. I think great strategy, but it was somehow free traffic for all the retailers listed on Amazon. Yeah, sure, could it be a strategy for them to also show you know the retailers on Amazon? Look guys, amazon ads is there for a reason. Not everything is free for you. Um, invest some more into Amazon ads, because Amazon ads is is huge for them 10% of the overall revenue share.

Speaker 2:

Uh, and maybe they wanted to test the impact on that, not even like incremental testing. How much more revenue do we get in in sales? But what does it do to a more important revenue stream, which is amazon ads?

Speaker 1:

yeah, yeah, I mean, it's a very interesting idea and there are layers to that. Like we, you'll see a lot of retail media networks with smaller retailers, um, who are newer to that business. They'll often uh, they'll often buy ads for their customers to sort of sweeten the pot and as a form of offsite. And you know, the premise is that they have some first party data from the retail platform that can then excuse me, that can then be used in that offsite targeting, so to say, or that offsite acquisition targeting, so to say, or that off-site acquisition, um. And it is in some ways a little laughable for amazon to be talking about google as off-site in a way, just because amazon is so big and their own off-site.

Speaker 1:

Yes, tech has gotten really mature at this point, um, you know, also on the display side, they're really challenging the trade desk and other and other of these dominant ad tech players. They're very challenging to Criteo at this point as well, or Criteo, because they're also working this from all kinds of angles. They are helping you set up your own retail media, so that's challenging to Criteo. They're also starting to test their own shopping-like format where they're actually sending. They're basically PLAs on Amazon that send traffic off Amazon to other people's websites.

Speaker 1:

You know so they're really. It's this multi-pronged approach, and it could be that one or several of these streams are in conflict with Google, or Google Shopping Might make sense, and from that, perspective, or Google Shopping Might make sense, and from that perspective, an incrementality test could make sense.

Speaker 2:

What's also interesting, mike, when we skip the potential reasons, because we probably never know the real reason anyway. But what's also very interesting you did some research on this Once. They decided to reactivate the campaigns again. What? What happened here? So, uh, let me put it that way if you reactivate a campaign of that scale again, what should normally happen? And what? What has happened?

Speaker 1:

well, let's, let's just back up one step further. So I want to talk about what happened when they turned off their ads. Um, because what you would expect is that this would be suddenly there is a big vacuum. Um, a major advertiser who is in just a staggering percentage of auctions has left um, and you that's. That's a shock, that's a system shock, and you would expect that cpcs would dip. Um, it might take a bit of time for the latent demand from other advertisers or latent supply, let's say latent advertiser supply to fill that vacuum, but advertisers might see their impression share go up, their volumes go up, their CPCs go down. It should be great news when such a large competitor drops out, but actually almost none of those things happened.

Speaker 1:

I did see that there were big winners. I also looked at this when Timu left from the US. We saw that it seemed like the biggest spenders benefited more than everyone else, and that seems to be the case here. In this case, timu was a huge beneficiary, um, but it just wasn't as exciting as people hoped, I think. Um, and I heard this from many retailers and brands, for you know, that was my kind of meta-analysis or aggregate analysis, but I also heard this feedback directly from advertisers interesting um that they weren't seeing that that's somehow strange, right, somehow strange, and also just how seamless it was.

Speaker 1:

I mean, it's hard because, yeah, google probably owns 90% of the bidding market. Yes, and it's all running through their technology and I don't know how robust a system like that can be. But it's also possible that their engineers knew that this was going to happen and helped ensure that it was seamless, that there was no shock.

Speaker 2:

I that this was going to happen and helped ensure that it was seamless, that there was no shock. I don't know. That brings up, of course, some, some more potential reasons why they did this, but it's really interesting that we didn't see any shock to to the auction across the board, which is which is not normal.

Speaker 1:

No, I mean optimizer, uh, friend, fred valais. He reported like, I think, an 18. Oh no, I'm sorry that was not. Oh, I have to check where that was. It might have been Tenuity, it was one of these large US agencies. They reported like a 18% reduction, I believe. When Timu left, when Amazon left in the pandemic, there was like a 20% reduction. That was coinciding with the pandemic.

Speaker 1:

So it's hard to disentangle that, but these are the kind of big shocks that you might expect, um and and now. I wouldn't have really entertained the possibility that Google engineered this in any way. But then when Amazon came back online, I mean it was stunning, because they were um account level competitors for about 70% of of advertisers. Um, before they left. And then when they turned ads back on overnight, like that same day, they were immediately competing with about 70% of advertisers again. And this does not align with my experience of how advertising works. If you pause a campaign, it's damaging to like you're going to initiate a new learning period. It's just disruptive and it takes time to scale spend. You don't just turn on that volume of spend.

Speaker 2:

This is the thing, ladies and gents. I mean, we have big clients no one is close to Amazon, we know that, but we have big clients spending millions, significantly more than a couple of millions, on a monthly basis in shopping. You notice, if you want to scale, sometimes it's not even possible to scale.

Speaker 1:

yeah, you sometimes it's you can't. You're like how do I get back where I was? Why is it different now? What's going on?

Speaker 2:

you, you and you do everything you can. And amazon, this, this huge behemoth, completely shuts down everything. No shock to the system whatsoever, and then, funny enough, they just turn it on again and overnight the campaigns are running on on the same levels again. Look, I, I don't know, it's just interesting, uh, yeah, to talk about it. One last question, mike, I'm really curious on that. Uh, so amazon is not back yet in the us uh any reasons why the us or um just the black box?

Speaker 1:

we, we I mean, we just don't know. But to speculate, if you look at two of these leading theories for example, that that it was a marketing incrementality test, they might have found that advertising spend just wasn't developing and this could be a reason why. But if we think about the other possibility, that perhaps this was related to ad tech, for example, it could have something to do with their ad tech strategy in that, because that's also where their ad tech offer is the most mature in that market as well. Like that's where they're doing the most with retail media enablement. That's where they're doing the most with testing these new shopping like ads, their AI features, everything is kind of the most mature there, and so if there is a conflict between Google Shopping and something else they're doing, it could be related to that. Yeah, and there's just even one other possibility.

Speaker 1:

Google has a new campaign type out um, which they call uh it's a super long name I can't remember. They're basically called Google ads for commerce media campaigns and commerce media is the newly google ads for commerce media campaigns and commerce media is the newly recognized term for retail media. It's. The iab is now saying no, it's not retail media, it's commerce media. But, um, anyway, the the premise behind that is that in the past, if you wanted to drive traffic because you can send traffic to any URL that you want to really so if you wanted to drive traffic to Amazon product detail pages, for example, you could do that Amazon was doing that to a certain extent on your behalf.

Speaker 1:

You could also do that, but you would be missing this connection because if you send it to your own website, you have your tracking installed there and you can measure the conversion. If you send it to Amazon, you don't have the tracking there and you can measure the conversion. If you send it to Amazon, you don't have the tracking there. So you can't know. You can't match that click ID and that conversion and this new campaign type. It depends on integration with the platform, but it can do that for you. And there are some signs of life on this campaign type from Google, like they seem to be running it a little bit with target in the us big competitor to amazon. Um, they, it could be related to this, we just don't know. They're all theories all theories.

Speaker 2:

We'll follow it closely yeah that's for sure, and maybe we'll have some more insights. Uh, next episodes. Yeah, mike, you have a lot of nicknames, right? You're my favorite american, you're my kim k katashian of performance max and you are mr timo and I would I would even go one step further.

Speaker 2:

You are, you're the mr china news, right? You? You, everything, you, everything you touch related to china. Is it's just gold, right? I mean, linkedin blows up uh, talk about timo, talk about a, talking about a lot of things going on there. We have some China news now on the agenda.

Speaker 1:

Yeah, there is some China news. What intro.

Speaker 2:

What do you want to talk about China?

Speaker 1:

Yeah, way to build up the pressure. Well, I think I mean. How to summarize this? I think that there's a very interesting, odd couple scenario playing out now between China and Europe and, in particular, jd, which is a massive Chinese conglomerate. I mean, they're an e-commerce player and retailer, but many other things are just vast. They own a lot of lines of business. They even have a German subsidiary, and maybe other European subsidiaries have a european or a german subsidiary, maybe other european subsidiaries, um, and they're making plays with two of europe's biggest retailers, ikea and um, media max at one or we'll just say, media market, for the purposes of the international group here. Um, so it's quite interesting because europe and china don't always get along, or usually they don't, and where some players like Alibaba and Timu and Sheehan have all taken, let's say, a less integrative or less partnership oriented approach, which is more antagonistic and not received. Well, here JD is working very hard on partnerships and so I think it's a smart strategy. Um, they have, as I mentioned, two things in particular like, let's talk about media marked. They're basically taking a moderate majority stance in the holding company.

Speaker 1:

Any news about the deal size? Yeah, the deal size, um. Deal size, um. I'm gonna just check that. I believe it was like six billion. I mean it's like 23 percent above the stock price at the time.

Speaker 1:

I think it was around six or 6.6 billion and they have a majority share now yeah, it's something like 57 percent or so, so it's not an overwhelming majority, but it's enough, yes, and there's still like a 25%. The other big player is this European player who's got another 25%. So they still have a say. It's respectable. But I see that very much as a win-win situation, because MediaMarkt is a wonderful company.

Speaker 1:

I, I mean, I shop from them a lot, yeah, they have, uh, a lot of the pricing advantages that you associate with like an amazon, um, and they but they also have a great physical retail uh presence and they're I really enjoy shopping there personally, um, no, no affiliation, um, but I make like I make a lot smaller purchases on amazon and I might make larger ones there, um, and so their reputation is good and their footprint is good. So it's it's, you know it immediately jumps jd's e-commerce and retail footprint up massively in europe, um, and meanwhile jd excuse me, media marked benefits from JAD's, let's say, more modern, more innovative supply chain and they've got a lot of impressive technology and deep pockets, yeah, and deep pockets. So that's also their structural commitments in place, like no layoffs, no store closures for three years, which sometimes you might get worried in a situation like this. So I think it's a very interesting partnership to watch and I think it's still subject to regulatory review.

Speaker 2:

That's for sure. That's for sure and of course could be one, of course not the first move from these big Chinese conglomerates, as you call them.

Speaker 1:

Yeah.

Speaker 2:

They have a lot of money and they want to deploy it. I'm really curious how this will work out, but I see this win-win situation.

Speaker 1:

It can be tough on other competitors on the rest of the market, though 1000%.

Speaker 2:

I think the deep buckets are probably. I mean, I don't know about the supply chain challenges MediaMarkt has, but I I think they had some financial challenges, which is a pity because I like the product of MediaMarkt. Mediamarkt is a good product and I think, with these deep pockets now, I think they will be good, they will be fine.

Speaker 1:

I agree. The other one that I want to mention is IKEA, and this I see as just interesting. It's super beneficial to IKEA, in my opinion. I actually know less about what JD gets out of it, but basically they're allowing IKEA to open, basically, an online store inside of their e-commerce presence in China, and so this opens up hundreds, because IKEA is on the ground there, but this opens up hundreds because Ikea is on the ground there, but this opens up hundreds of cities that Ikea doesn't have access to Otherwise. It's a massive move. Yeah, I'm messing, so that's also just something to watch, and I find both of these to be smart moves from JD, partnership oriented, and for other European players, it's potentially a bit concerning, because some might view it as a wolf in sheep's clothing, because these are still large, dominant Chinese players in the end, and it does sort of change the character, but it's something to watch for sure.

Speaker 2:

We'll find out. So, mike, this is a wrap. I would say roughly 40 minutes into the time box. I enjoyed it. Me too into the time box, I enjoyed it me too, chris. I really enjoyed it it was good.

Speaker 1:

It was good catching up with you again, for sure, even if you look a little shabby.

Speaker 2:

Mate don't expect too much. Next episode still somehow underwhelming, but the third episode.

Speaker 1:

I will be back with my, with my A game stay tuned for when his clueless wardrobe is back up For sure, Mike thanks a lot. Thanks everyone and uh, yeah, thanks, thanks for listening. This is uh been another episode of Growing E-Commerce. Growing E-Commerce is brought to you by Smarter E-Commerce. You can learn more over at smarter-ecommercecom. And, please, if you enjoy the podcast, we will be making more episodes and recommend it to friends, co-workers, whoever you think might enjoy it. We really appreciate it.