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Google, Amazon to face off in 2013

business Updated: Dec 27, 2012 01:33 IST

When Inc CEO Jeff Bezos got word of a project at Google Inc to scan and digitise product catalogs a decade ago, the seeds of a rivalry were planted.

The news was a “wake-up” call to Bezos, an early investor in Google. He saw it as a warning that the Web search engine could encroach upon his online retail empire, according to a former Amazon executive.

Thus began a rivalry that will escalate in 2013 as the two firms’ areas of rivalry grow, spanning online advertising and retail to mobile gadgets and cloud computing.

It could upend the last remaining areas of cooperation between the two companies. For instance, Amazon’s decision to use a stripped down version of Google’s Android system in its new Kindle Fire tablet, coupled with Google’s ambitious plans for its Motorola mobile devices unit, will only add to tensions.

The confrontation marks the latest front in a tech industry war in which many combatants are crowding onto each others' turf. Lurking in the shadows for both Google and Amazon is Facebook with its own search and advertising ambitions.

“Amazon wants to be the one place where you buy everything. Google wants to be the one place where you find everything, of which buying things is a subset,” said Chi-Hua Chien, a partner at venture capital firm Kleiner Perkins Caufield & Byers.

Both firms have a lot at stake. Google’s market capitalisation of $235 billion is about double Amazon’s. Amazon shareholders have been patient as the firm has invested for growth but it will have to start producing strong earnings at some stage. Google’s share price, on the other hand, is vulnerable to signs of slowing margin growth.

Not long after Bezos learned of Google’s catalog plans, Amazon began scanning books and providing searchable digital excerpts. Its Kindle e-reader, launched a few years later, owes much of its inspiration to the catalog news.

Now, Amazon is pushing its online ad efforts, threatening to siphon revenue and users from Google’s main search website.