Google AI’s Secret Plan: The BIGGEST THREAT to Your Retail Business Yet?

Episode Transcript

Mike: 0:00:08

Welcome to another episode of Growing E-Commerce. I’m your host, Mike, and with me is co-host Chris.

Chris: 0:00:40

And we always stay on the ground floor, at least mentally. We are grounded people. That’s what I mean.

Mike: 0:00:48

Yeah, like Jeff Bezos, it’s always day one or day zero or whatever he says. Absolutely. All right, cool. So, Chris, you are freshly returned from DMEXCO in beautiful Cologne, Germany.

Chris: 0:01:02

And it was a blast. I can tell you. The setup today is somehow different. Honestly, I miss sitting face to face with you, but I think it will be good anyway.

Mike: 0:01:14

Yeah, we’ll get back together in the office soon. That’s like a seven-hour train ride each way, right?

Chris: 0:01:23

Yes, I went by train because if you look at the net travel time, train is right up there with going by plane. The huge difference is you can be productive for probably six and a half hours straight. I really needed this time because I needed to do some prep. I had two talks at the convention this year. You were part of the prep, so you know better than me. I really enjoyed the train ride and the convention itself was a good one. It’s a huge contrast to OMR, which becomes more and more a festival—Online Marketing Rockstars. DMEXCO has on average older people, more decision makers, and I think the content is just a bit more mature. Nothing to take away from OMR—I love being there—but it feels different.

Mike: 0:02:25

If anyone is not familiar, I bet if people are familiar with one of these, it’s DMEXCO because I think that’s achieved better international recognition at this point. OMR is super massive, but it’s more German.

Chris: 0:02:40

And the question is if OMR became too successful. It’s so big that it’s probably too big. DMEXCO is big, don’t get me wrong, but it’s more manageable, mentally and cognitively. One thing that stood out this year is that it’s becoming more and more an international convention. English-speaking talks are popping up more, which is a good and a bad thing because most of the crowd is non-English native, which sometimes makes it harder to transport the message as powerfully as you could in German. But they’re driving for an international flavor.

Mike: 0:03:36

Well Chris, as a native English speaker, I have to tell you it’s part of our secret conspiracy to exert hegemony through linguistic dominance and squashing local cultures.

Chris: 0:03:48

I love talking in English, also knowing that I’m not on the same level as I am with my beloved German. But it’s good. Honestly, because I had one talk in English and one in German, as crazy as it sounds, talking about e-commerce-related topics sometimes feels easier in English. I’m fine with it. But I love the conspiracy. Could be a topic for one of our Christmas episodes, right?

Mike: 0:04:17

Exactly. I’m tempted to go down a rabbit hole here, but we’re far enough down already. We want to talk about one of those presentations you gave. You were on one of the big stages with a crowd of about 600 plus people. Did that feel all right, Chris?

Chris: 0:04:36

I remember because last year Mike was on this big stage, and I listened carefully and felt like, dude, this guy is sharp up there. I had a lot of pressure on me this year, but it’s one of the biggest stages I’ve been on. It felt super professional. The crazy thing, Mike—and that’s what you told me—is once you’re up there, it doesn’t feel that big anymore. You zoom in on a certain area of the crowd. It felt awesome. It was a great experience. Shout out to the DMEXCO team; they did a great job.

Mike: 0:05:19

Thanks for sharing that experience, Chris. Talk to us about your presentation. We worked on some of this together, and I want to share this with the audience. I didn’t get to see you give the talk, so I want to hear your perspective and I’ll share mine as well.

Chris: 0:05:39

Let’s have an open conversation about it. Thanks again, Mike, for helping me out with the content and storyline. When I’m on stage, the thing I’m always looking for most is indications that people are engaging. The most objectively observable indication is certainly taking out the phone and taking pictures of something you want to look at in the aftermath. We knew we had some bold statements in there, but it was one of the most engaged presentations I’ve had in quite some while. I think the reason is because we were quite bold about our view on the future of e-commerce, in particular what will be going on in the field of paid search—Google paid search. Our statements led to some shaking heads and big eyes, and that’s what we wanted. We wanted to create thought processes, and I think we achieved that.

I started with some clarifying statements about the hypothesis that Google search, the core product of Google, is cooked. It was even a topic in one of our episodes. I was quite critical and bearish on Google in the mid and long term because we were missing the AI strategy. How do they embed it into their search product with Perplexity and ChatGPT as disruptive players? There were legit threats. Fast forward a couple of months, I think there’s no need to fear for Google’s dominance. They are as strong as ever. In my talk, I shared the reasons why. Their core product, Paid Search, crossed another 55-56 billion in Q2 this financial year for Google, which is roughly 12% year-over-year growth. It’s mind-blowing to cross 50 billion with a product and still grow double digits year-over-year.

Mike: 0:08:12

It truly is. At first, it seemed like Google was caught very flat-footed and they had all this “code yellow” or whatever they called it. Bard was a big swing and a miss. But they’ve largely quelled a lot of that and revenues are still up. Meanwhile, we’ve talked about Perplexity on this podcast before too, but it’s been about a year since they talked about rolling out ads. It’s also been quite some time since they talked about integrating shopping and building up their own Merchant Center. They’ve gone through at least one or two chiefs of their ad unit. It’s not that easy to just spin up an ad network out of nothing and take off. And meanwhile, Google executes and they come through strong with Gemini 1.5 onward.

Host: 0:09:09

What is a problem?

Mike: 0:09:11

Yeah. And then meanwhile, Google executes and they come through strong.

Chris: 0:09:18

Gemini’s just—and this is one of the major reasons why Google keeps growing in their core revenue. Search makes up for around 60% of overall Google revenue. So this is the thing for them. They just found their mojo. One reason why they found their mojo is because the initial pressure everyone thought was there regarding Google—created by Perplexity and ChatGPT—was just not as fast as we all thought. In the meantime, Google executed their strategy extremely well. I think they do it very cautiously. Another thing: Google is just too big to fail in the eyes of the consumer. They’re so deeply embedded in our daily life. I shared this one stat during my talk: there are upwards of 5 trillion search queries globally, and a whopping 90% go through Google. How to overcome this is crazy.

Mike: 0:10:47

Google’s five out of 5.8 or something like that. It’s nuts. You shared some new data from OpenAI about how people are using ChatGPT. Looking at the numbers, one category is seeking information. This is the classic Google-ish use. That’s the Google search part of ChatGPT. Of course, there are other behaviors, but seeking information is 21.3% of ChatGPT usage. This shows how much broader ChatGPT is. People talk about it taking on search, but it’s a different kind of thing because people are using it for other use cases too. Of that information seeking, 2.1% of all ChatGPT’s usage is related to purchasable products.

Chris: 0:11:57

Roughly 7-8% of these 20% information-seeking search queries. How do you interpret that? I had some conversations after the talk: is this good or bad? I think the more important thing for listeners to understand is that Google cares about the market share of overall search volume because that’s the foundation. But at the end of the day, it’s all about buying-intended search queries. This is where the money is made. That’s another reason why Google keeps going strong: the share of overall search queries on Google with buying intent stays around 14-15%. They grow the overall search volume and the share of buying-intended search queries stays the same. This is the money-printing search query everyone is looking for. If you compare the 14-15% to a normalized 7-8% on the ChatGPT side, you can see the massive advantage Google has. There’s just more buying intent on Google. However, these 7-8% happening now in this information-seeking cluster on ChatGPT are already significant enough. For me, the next step is clearly that ChatGPT will start monetizing this because they have to reduce their burn rate. What do you think the strategy will look like for ChatGPT in terms of a paid search product? What’s your take and timelines?

Mike: 0:13:44

I agree it’s a volume you can’t just shrug off anymore. It’s probably a lot bigger than what Perplexity is doing. You mentioned paid search. There are two sides: an advertising side and an e-commerce side, and those two can intersect. On the advertising side, we don’t have a huge amount of details. They released some new financial models about monetizing non-subscribers, which must be advertising. The latest rumors I’m hearing are that could happen in Q4 of 2025. They could start piloting that. We’ll also see if they can move things along a little bit faster than Perplexity did.

The other half is e-commerce. There have been leaked documents suggesting they might go with a commission-based model. If someone is searching for specific recommendations on running shoes, the AI surfaces things from its understanding and research. If there’s a checkout embedded in the chat, you can potentially pay a commission to receive that. Another possibility is injecting product listings for people who want extra visibility. These two things are not necessarily mutually exclusive; we could be looking at buy boxes and sponsored listings side by side. I think they’re absolutely interested in bringing structured data into this, not just depending on unstructured data out there. It’s going to be interesting to watch.

Chris: 0:15:53

Interesting. This was also the elephant we addressed in the room. Google is back with their AI strategy. AI Overviews is a great product, but everything they ship right now is on the playing field of organic search. Organic search isn’t part of the core revenue stream. They have a playing field here to test things out. If you look closely, you can see how disruptive these AI-based products can be. AI Overviews are a big signal because they are producing zero-click events in masses. I don’t need to go to a publisher’s website anymore. This one product disrupts a whole industry of content creators and publishers. The data shows clicks are going down while impressions are up. The big question will be: when will the step towards the paid search field happen, where AI-based products like shopping assistants will massively disrupt the e-commerce workflow as we know it—where you have a click, someone goes to your website, you build a relation, and they buy? What is your take on this?

Mike: 0:17:32

People have been complaining about zero-click phenomena from Google for years. It’s not new, but it’s massively accelerated. Google denies there’s a problem, but they also contradict themselves. There’s clearly a problem on the organic side in terms of informational queries. We were looking at data from eMarketer, and so far that organic traffic decline is not being seen in e-commerce. It seems limited more to informational queries, not commercial search funnels. But there are signs that’s starting to change bit by bit. With AI mode, that can happen even more because Google decides if they’re going to show an AI Overview for a query in the classic SERP. But AI mode is an alternative where the user is in much more control and interacting more with the AI. My impression is that there’s less mediation by Google there. People can use AI mode however they want. I’ve been using ChatGPT as a shopping assistant for a couple of years, even though it’s not specifically built that way, but it’s a sandbox. The question is: do they then start to build features to support that use case, which ChatGPT has already begun doing? Google can start doing this as well. That starts to disrupt the classic e-commerce funnel and relationship that has existed so far.

Chris: 0:19:34

The mechanics which apply in order to be able to push your product to be shown will be highly disrupted. The AI mode, which is Gemini-powered, will crawl all the organic content. The whole mechanic of how to push your product will probably change. The biggest change from my humble opinion is if ChatGPT—and you made a convincing statement that there are leaked documents—introduces a buy-in-app possibility so I don’t have to go to a website anymore. Perplexity also claimed they are going down this route. What if Google gives “Buy on Google” another try? It didn’t land well in France five years ago.

Mike: 0:20:32

They tried in the US as well. It was a disaster in both markets.

Chris: 0:20:36

Okay. Elaborate on this for all the listeners who run or own a web shop. This changes everything fundamentally. If I’m just a warehouse for Google—let’s be provocative here.

Mike: 0:20:55

“Buy on Google” was this attempt where they had little units next to standard product listing ads. Functionally identical, but instead of going to the e-commerce website, there was a chance to buy right there and pay a commission. Similar to what we were talking about with ChatGPT, and a bit like a buy box in Amazon. That was a total disaster. It was rejected by the market. They had slow linear growth and then it just flatlined. They even took the commission away and couldn’t get people to do it for free. That’s just not the relationship people wanted to have with Google. They would rather pay to have that traffic come to their website where they can own it, bring it into their CRM, and gather first-party data. Now the question is whether Google’s market power is strong enough or if expectations have changed. Like we’re stealing from our friend Stefan Wenzel—who has been on this podcast before—back in the day, people talked about big box retailers like Best Buy as Amazon’s showroom. Shoppers would go in-store to pick what they wanted and then buy it online cheaper. Now you are like ChatGPT’s warehouse. People find what they need on ChatGPT or in AI mode, and then you just end up fulfilling that order. It’s much more low-value, transactional—not relational.

Chris: 0:23:14

Relational. The change from a CPC model to a commission model would be fundamental. But the change where I “Buy on Google” and don’t care where I buy it because Google becomes the marketplace is not the brightest future for retailers. I didn’t tackle it during my talk because I only had 20 minutes, but at the end of the day, Google is a great product because it drives client value. If Perplexity or ChatGPT can make this better with a leaner shopping experience, I assume Google will have to follow to a certain degree. That’s why we made the statement that it’s not a question of “if” this will happen—meaning the commission model or Buy on Google—it’s rather “when.” Ultimately it will be about the value they create for the end consumer. What’s your take on that, Mike?

Mike: 0:24:56

I don’t think this is a zero-sum game. AI shopping assistants won’t rise to 100% of the market, just like e-commerce hasn’t risen to 100% of retail. Some people like to browse, look at things on their own, and visit different brands. It depends on the category and demographic preferences. But I definitely expect that we’re going to see this old-school model of people visiting e-commerce websites start to go into a form of secular decline. That’s definitely bad for big retailers who have been building whole propositions about volume and spinning out their own marketplaces and retail media networks. Marketplaces are highly threatened as a category. Retailers are moderately threatened, and brands a little bit less threatened.

Chris: 0:26:25

I agree on that. The biggest threat right now is to publishers because AI Overviews are already eating their lunch. When “Buy on Google” happens with different mechanics, marketplaces will be in massive trouble. Multi-brand online stores probably second. Brands are to a certain degree safe because they have more direct traffic and a stronger relationship by design.

Mike: 0:27:04

Brands: it becomes part of this D2C versus distribution thing. Even D2C purists realized you can’t ignore distribution. Amazon is a channel; D2C will be a channel.

Chris: 0:27:20

Ask Nike.

Mike: 0:27:22

Ask Nike. We talked about this in a previous episode. For brands, this becomes another channel, and maybe it’s not the best development in the world, but it’s probably not the worst either.

Chris: 0:27:34

Precisely development is ahead of us, that’s for sure. But we will monitor it closely.

Mike: 0:27:39

Retailers and marketplaces serve a comparison function. For them, it’s probably not going to be as much fun. But we’re getting a little tight on time, Chris. You want to close it?

Chris: 0:27:51

I think we covered the most important things. I would love to discuss this another 30 or 60 minutes. It’s a fascinating topic. I’m so curious what’s going to happen. If something significant is shipped by ChatGPT in Q4—because Google is playing on its own terms right now and playing perfectly, step-by-step, not interfering with the paid search product. The reason they can play so safely is because ChatGPT and Perplexity haven’t had their “home run” moment. If it happens in Q4, we’ll look at a much bigger dynamic. It’s crazy times.

Mike: 0:28:38

It’s not a given. It’s impressive how fast ChatGPT has grown, but Google has this critical mass. They are like one of the supermassive black holes around which this whole galaxy is spinning. They are here to stay. It’s going to take a lot to change that dynamic, and it’ll be a matter of years.

Chris: 0:29:06

The cool thing is—even if the threats are not as big as we might have thought—at the end of the day, the end consumer will benefit the most. Google is forced to innovate way more fundamentally now compared to 10 years ago. This is a great thing because Google is one of the greatest companies on this planet. Great innovations will happen and they will disrupt some businesses. We will have a lot of things to talk about in this podcast.

Mike: 0:29:42

The whole ecosystem will need to evolve. But let’s leave it on that note. Thanks, Chris, for sharing your DMEXCO experiences with us. We’ll see you all next time. I will carry the weight of the world on my shoulders here with intros and outros. Thanks everyone for listening to another episode of Growing E-Commerce. Growing E-Commerce is brought to you by Smarter Ecommerce. You can learn more over at smarter-ecommerce.com. Please remember to share this podcast with your friends and family if you think they’d be interested. Leave us a review and give us a star rating. We really appreciate it. Thanks, and we’ll see you next time.