Why Amazon is OK and Google is Not
February 4, 2014
As I write this article, I have just finished reading a WSJ article about how Amazon is thinking about diving into the payments space, something that I can imagine retailers aren’t too thrilled about. That makes it challenging to title this article, because there are probably a lot of retailers out there who believe that Amazon is not OK. So as you read, keep in mind that I’m speaking more from the consumer’s perspective here.
Two articles came up in the news lately that have led me to the conclusion that in general, consumers think Amazon is OK and Google is not. First, Amazon has made a couple announcements that have generally been met with a mild response – along the lines of “Oh, those crazy Amazon guys. What will they think of next?” The first was the widely covered announcement about drone deliveries, otherwise billed as “Amazon Prime Air”. The second was the announcement about anticipatory shipping – basically, using sophisticated predictive analytics to anticipate consumer demand by pre-staging packed orders closer to where Amazon believes the demand will come from.
Now, I do have to give credit to the marketing genius that came up with the term “anticipatory shipping” and then apply to something that supply chain people have long known by the much more boring term “forward positioning of inventory”. And I have some strong feelings about the state of our patent office in the United States, that it would see what Amazon is doing as something that could be patented. The algorithms, maybe. But the idea? Ridiculous.
But if you look at what’s in the patent filing, Amazon is basically using all of its customer data – behavioral, basket, purchase – as an input into predicting (and anticipating) that behavior. They’re using customer data to create a speed advantage in responding to customer needs.
Some might argue that being able to deliver my pack of Sharpie markers next day for a Prime subscription – simply because Amazon knows me well enough to know that in the next two weeks I have a high likelihood of ordering Sharpie markers – could border on “creepy.” But somehow, Amazon received no blowback for this use of customer data. Why? Because it increases my convenience factor in order from them. They’re not using my data to try to sell me something else. They’re using it to get me the things I want faster.
On one level, as a consumer I share their disquiet. It’s disconcerting to think that a company that values data so highly now has access to a whole new level of data about me (for the record, I don’t own a Nest thermostat, but we thought really hard about buying one). On the other hand, Google already knows a hell of a lot about all of us, and if you have an Android phone, they know even more. And I’ve heard plenty of people posit the theory that Amazon’s whole retail business is just a loss leader. For what? For the acquisition of your data.
So why is Amazon okay and Google not? The answer lies in how these companies choose to use their data. Amazon is using it to make my life as a customer more convenient. When they make my life more convenient, I tend to give them more of my business, and theoretically, Amazon will make money from that (assuming the whole loss leader thing isn’t true).
But with Google, they offer services that theoretically are convenient – free Gmail, Google Docs, Google Drive, etc. – but in return they are making money by selling my data to literally the highest bidder. Maybe not explicitly selling my data, but using what they know about me to solicit advertising money from businesses trying to reach people like me. What’s missing from that equation is my vote in what I want to receive.
Is this merely a difference in perception? Maybe. But with consumers still stinging from a Target breach that involved data from people who didn’t even consider themselves Target customers, the sensitivity around what data companies collect and how they use it seems to be at an all-time high.
I’m a pessimist about this topic. In time, the sting fades, and frankly, people have much better things to do in their lives than worry about all the ways their lives, health, or security are threatened – unless that is literally your job, that’s a trip down paranoid road if you dwell on it too long. So it won’t be long before we forget, once again, that companies are collecting a hell of a lot of data about us and we don’t have much say in what’s collected, how long it’s kept, or what they do with it.
But for retailers watching the battle of these behemoths, and who’s winning the perception war and who is not – it’s worth learning something from the fact that even though these two companies are basically doing the exact same thing for the exact same profit motivations, for consumers, one is OK. And the other is not.