.

 

Delivery: The New Front in Corporate Surveillance and Monopoly Power

That friendly delivery guy at the door?  He’s the new face of corporate surveillance as tech titans launch a new war to control data on what and how you buy things.

Google announced this past week that it will build on its existing Google Express delivery service, which partners with multiple companies like Target, Costco and other specialty stores, to add fresh food delivery, primarily through a partnership with Whole Foods, starting in San Francisco.

Amazon, which already does fresh food delivery through its Amazon Fresh service, is adding restaurant delivery as well, starting in Seattle and moving on to other cities presumably.

They are both competing with other delivery services such as Instacart’s grocery delivery service, which operates in 17 U.S. cities, as well as meal delivery services from PostMates, Seamless and other companies (see this CBinsights chart).

For Amazon, expanding delivery gives it a chance to expand the lure of its Prime service and sell more and more stuff.   Why Google is involved in delivery is a harder question, since it’s selling other peoples’ stuff and being a middleman is hardly a high-profit spot in the marketplace – and most evidence is that Google is losing significant money on these delivery ventures.

However, what Google – and other tech firms – get from delivery is not just short-term profits on individual sales but precise data on what people are buying.  If your business is advertising, knowing what people buy is golden data, since it helps other advertisers more precisely target ads to the demographic groups most likely to buy their goods and services.

Google knows tremendous amounts about what people want to buy, since they get to precisely track hundreds of millions of consumers as they search the web for information on potential purchases.  For them, the holy grail has been for years to better connect that data with information on what those consumers actually end up buying in the end.  For years, they’ve tried to promote payment systems they control such as multiple iterations of their Google Wallet system – and just last week launched a successor system Android Pay – to help deliver better data on consumer transactions. 

But payment systems are tricky since they require multiple agreements by vendors, financial companies and consumers to put in place.  Taking on delivery is an expensive but more direct way for Google to put itself right smack in the middle of consumers purchases of a range of goods. 

The payoff is that Google will be able to observe the full lifecycle of consumer purchases, from noodling around the Internet doing research to finding their final choice to getting the product or service delivered.  Every click and every delivery will create new invaluable data for the company, data worth far more than any small profit margins (or even probably small losses) on the costs of delivery itself. Combined with all the other data a company like Google has on a consumer, this will give advertising campaigns a chance to target consumers at every point of potential influence on their decision-making.  And it will only reinforce Google’s monopoly dominance of online advertising.

This highlights a problem in the business press which tends to treat new ventures by tech companies as “competition” in some new sector rather than part of a strategic extension of power in existing markets.   Just as Microsoft entered web browsers way back in the 90s not to make money on Internet browsing but as a way to reinforce its operating system and Office sales, the entry of Google or other tech companies into odd new ventures like delivery should be evaluated at the start for their value in reinforcing a company’s core business operations.  

Google will never match Amazon in e-commerce sales, but it never intends to since that’s not its business model and Amazon is not its real competitor.   In fact, delivery will help Google further entrench its dominance of online advertising versus its real competitors, Microsoft in search advertising and Facebook in display advertising. 

Both the business press and the courts have increasingly outmoded models in discussing markets and competition in the new data-driven economy. As Google expands its delivery and other e-commerce ventures, it’s about time both do a better job of analyzing how such ventures reinforce monopoly power.

ContentIssues

Commerce