April 30, 2003, 12:00 AM

A new deal with Google points Amazon customers away from Amazon

Customers who search on certain terms at Amazon will receive not only the search results as they relate to products that Amazon sells, but also paid links provided by Google to other sites that have content relevant to the search.

In “Miracle on 34th Street,” Macy’s scores big with customers when its Santa Claus starts directing customers to other stores where they can find merchandise that Macy’s is out of or doesn’t stock. It’s such a hit that Gimbels quickly follows.

Amazon.com Inc. is now doing something similar: Starting in the next several months, customers who search on certain terms at Amazon will receive not only the search results as they relate to products that Amazon sells, but also paid links to other sites that have content relevant to the search. The links will be provided by Google, which will analyze what the customers are looking at on the Amazon page and deliver the appropriate links from relevant advertisers among Google’s 100,000 advertising clients. “It’s a way for Amazon to add value to a page if they feel the customer would benefit from more information,” says Joan Braddi, Google vice president of search services.

Some analysts believe the arrangement is part of Amazon’s journey toward becoming a retail services provider, rather than a retailer. “This isn’t about selecting merchandise and offering it within the context of meeting customers’ expectations,” says Duif Calvin, a San Francisco-based independent retail consultant. “This is about taking users that come to the site for one reason and introducing them to other places to spend money.”

Google and Amazon will create a link between Amazon’s search engine and Google’s database of advertisers so Google can deliver appropriate sponsored links. The service is similar to Google’s AdWords program by which a user searches on a term at Google.com and the results display not only relevant sites but also sponsored links that advertisers pay Google to display near the search results. Google receives a commission from sales that occur when customers click on the link and make a purchase. This is another way for Google to earn revenue from click-throughs, Google says. It will share that revenue with Amazon for customers who click through on links from Amazon.

For example, a customer who searches on “Bruce Springsteen The Rising” will get not only the Springsteen CD and Amazon’s familiar reviews and “customers who bought that also bought this,” but also sponsored links to services selling tickets to Springsteen concerts.

The Amazon deal is similar to Google’s deals earlier this year with publishing sites, portals and other non-Google sites to provide AdWords when users are viewing content at those sites. In those cases, the customer doesn’t even have to search on a term. If she is viewing stories about tabletop arrangements, for instance, Google’s engine will analyze the page contents, then populate the page with ads for retailers of dinnerware, flatware or other home furnishings.

The deal is also a further extension of such moves by Amazon as referring customers to Drugstore.com for specialized, regulated products, or offering used merchandise at Amazon. The difference, Calvin says, is that Amazon still exerts control over transactions that take place under those auspices, including guaranteeing used merchandise. It will have no control over what happens at other sites. Sites may not be prepared for the volume they could get from Amazon, for instance, or they may not operate up to the same standards as Amazon. “The real issue will be how this will impact Amazon’s reputation,” she says.

Last month, Amazon also started hosting the Google web search engine so customers who can’t find what they want at Amazon can search the web directly from the Amazon site-sort of like Macy’s giving customers directions to the Guggenheim or Yankee Stadium.

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