GOOG, AMZN

Today, at an interview sponsored by the Benchmark-portfolio company Sailthru, legendary [venture capitalist] Bill Gurley appeared on stage [..]

Gurley evoked a “reversal of funnel” concept, saying that for nearly two decades Google has enjoyed a perch at the top, where “you do the least amount of work” and the money is easy. Meanwhile, lower in this metaphorical funnel — where you see the “nitty gritty, the hard work, the touching of physical goods,” he said — Amazon has been clawing its way upward with every transaction that solidifies its consumers’ trust in its pricing and its ability to deliver when it says it will.

The end result is that now, when the tens of millions of people who subscribe to Amazon’s Prime service go online, they “first search with Amazon Prime checked, then Prime unchecked, and then, if that doesn’t work, [they] go to Google,” said Gurley, likening it to the “search of last resort.”

That means two things for Google, Gurley said. First, and most plainly, Amazon now threatens a much broader section of Google’s search traffic, which is e-commerce. Amazon and others have Google playing catch up, too, including through products like Google Express, which Gurley views as a “chaotic response” to the challenge. “It’s not set up in a logistically optimal way. I think it’s defensive, rather than offensive. And I don’t think big companies do well with defensive strategies.” [..]

As for where e-commerce startups would be smart to compete:

Two words, said Gurley: “Anxiety relief. Humans love it when you remove [anxiety].”

“When [Uber CEO] Travis [Kalanick] started Uber, he insisted there not be a [option for a tip built into the app]. He didn’t want the user experience to include this anxious moment of, ‘What should [the tip] be?’”