A top Wall Street tech analyst says Google is 'less relevant' in e-commerce since the pandemic — and it needs to develop or acquire to start gaining ground on rivals like Amazon

By Hugh Langley

While companies such as Amazon, Shopify, and even Facebook have seen huge tailwinds to their e-commerce businesses during the pandemic, Google continues to lag behind.

That much was made apparent when the company announced its Q2 earnings last week, revealing an 8% drop in search advertising revenue year on year – and a historic revenue decline overall.

Now, Google and analysts have a renewed focus on shopping, but they want to know: can Google catch up?

"There's clearly this spike in e-commerce activity – that's what's behind the rise of Amazon, eBay and Shopify – and at some level you wonder is Google less relevant to overall e-commerce than it used to be?" RBC analyst Mark Mahaney told Business Insider.

"I think it's something they need to address," he added.

Amazon has seen a monumental boost to online shopping during the pandemic,doubling profits to $5.2 billion in the second quarter and exceeding Wall Street expectation by a whopping 600%. Meanwhile, Shopify reported a revenue jump of 97% from a year earlier.

"When we have this pandemic-induced spike in online retail, Amazon full participates, Shopify fully participates, and then Google doesn't," said Mahaney. "So it kind of highlights that they're less relevant in e-commerce, I guess that's the clear evidence. That's something to really mull."

Google has made several recent notable changes in shopping, which analysts believe could pay off in the coming months. For example, at the end of June, it announced it would make it free for retailers to sell products in search results.

Shortly before that, the company shuffled Prabhakar Raghavan – previously SVP of ads, commerce and payments – to the top of a huge internal structure where he'll also oversee search and geo, which could help Google in its efforts to push shopping. 

In fact, on an investors call last week Google CEO Sundar Pichai said there would be a "long-term focused effort on shopping with the new leadership team," alluding to the benefits of the reorg in the coming months.

But it will be a tough battle ahead, particularly going into the holiday months where Amazon will only reap more of the rewards.

"I don't know if they have to acquire or develop their way back. And it may be that they just can't," said Mahaney. "They'll always be relevant, they'll just be at the margins slightly less relevant, and they have enough properties that that's ok. That could be the answer."

He added: "If you wanted to sell on the internet, you once had to pay Google and it drove a lot of traffic your way. It's less obvious now that you have to pay Google to grow."