NEW YORK (TheStreet) -- Google
(GOOG - Get Report) said Monday that it will be spreading its same day delivery service through Google Shopping Express outside of the San Francisco Bay Area to include Manhattan and West Los Angeles.
Google also announced that the service would remain free for six months as it hashes out a pricing plan that makes sense. Online shopping has always been a low margin business, so why might Google be interested in providing an online shopping platform with free delivery?
There are at least a few factors in play here, but anytime Google does anything the first place to look is in data. The bread and butter of Google?s business revolves around serving well targeted ads to consumers of its services, which are often given away for free. Google Search, Youtube, Gmail, and Google Drive all come to mind as services that are completely free to use. In exchange for the free services Google collects our data and uses the data to sell more valuable advertisements at higher prices. If online shoppers used other express delivery services like the one provided by Amazon.com (AMZN), Google would see valuable consumer data slip through its fingers.
Speaking of Amazon, they must be mentioned in any discussion of online shopping in the U.S. Amazon's stock has been getting hammered this year. Year to date shares fell from $398.8 to $310.05, or more than 22%. Amazon has now missed the market's earnings expectations as represented by the consensus from Estimize.com 2 quarters in a row with fourth quarter 2013 standing out as a particularly bad quarter. The e-commerce giant pulls in plenty of revenue but frankly its costs are too high. During the holiday quarter Amazon brought in more than $25 billion in sales and last quarter they were just shy of $20 billion. On the bright side though, the pressured profit margins are spurring innovation in delivery technology.