BREAKINGVIEWS-Google sets out inviting stall for robot shoppers

By Sebastian Pellejero

NEW YORK, Jan 15 (Reuters Breakingviews) - Google is welcoming new robot shoppers. The web search giant rolled out artificial intelligence this week that can browse, compare and buy goods on behalf of customers. It's an attempt to lay claim to virtual shelves and store windows in a world where machines, rather than people, wield $6 trillion of worldwide purchasing power.

Until now, e-commerce has been organized around human behavior. Search engines auction keywords, retailers refine websites and online bazaars compete for attention. The system makes little sense, however, when software agents do the choosing. An AI assistant does not click on ads or browse product pages.

Google's new Universal Commerce Protocol defines a standard sales format intelligible to computers. Vendors must supply clear data describing what's available and on what terms. Offers are then weighed by how complete, current and reliable the information is. These rules, developed alongside retailers such as Shopify SHOP.TO and Walmart WMT.O, are freely accessible and compatible with competing services.

By shaping the standards, as with its dominant search algorithm, Google can gain leverage over outcomes without owning the transaction itself. It's a different approach from other efforts. OpenAI's tools, for example, sit inside conversational assistants while relying heavily on scraped listings or bespoke partnerships. They help answer questions, but do not yet impose a common structure on commerce.

A new framework threatens to upend the profit pecking order. Shopping-related searches are among the most lucrative on the internet. They convert into customers far more often than generic queries and underpin a large share of the roughly $300 billion worldwide search-advertising market. Amazon also controls roughly 40% of U.S. online retail and extracts effective fees that exceed 30%. Both models depend on humans being in the loop.

Even modest automation would shift vast volumes. AI agents could be involved with 15% to 25% of routine online purchases within a few years, according to consultancy Bain. Whether customers will actually let software do their shopping is another question.

For Google, the strategy is as defensive as it is ambitious. Its $4 trillion parent company, Alphabet GOOGL.O, derives about three-quarters of roughly $400 billion in annual revenue from advertising. If AI bypasses conventional methods of reaching shoppers, boss Sundar Pichai will need to establish new chokepoints to avoid ceding ground. Installing the store plumbing is a good place to start.

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CONTEXT NEWS

Google unveiled its Universal Commerce Protocol, a new open standard for AI agent-based shopping that operates across different parts of the customer buying process, at the National Retail Federation conference on January 11.