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Google Shopping And Its Impact On Online Retailers

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Google Shopping And Its Impact On Online Retailers
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Earlier this month, Google announced the official date that all Google Shopping results in the U.S. would come from merchants who are Product Listing Ads advertisers. That date was October 17 – Wednesday.

Is the new Google Shopping an improvement for sellers? For consumers? Let us know what you think.

“We will be ranking these results based on relevance, with bidding as an additional factor,” Google reminded us. “The ranking of natural search results on Google.com will not change.”

We had a conversation about the transition with Michael Griffin, founder of Adlucent, which exclusively managed Amazon’s paid search until Amazon took it in-house in 2009. It currently powers paid search and shopping analytics for over 130 other retail brands, and has been managing Google Product Listing Ads for clients. The company, in fact, teamed with Google on a case study about Product Listing Ads.

“The same retailers that thrive in paid search today will have the highest chance of being successful with PLAs,” Griffin tells WebProNews. “Since the bids a retailer can afford are dependent primarily on a retailer’s ability to convert buyers (conversion rate) and maximize cart value (average order values), the best retailers will continue to dominate. Important to note, we are in a period where competition is low and CPCs are somewhat depressed. Right now, PLA CPCs are about 20% lower than paid search CPCs. Eventually, we expect CPCs to be 15-20% higher than paid search CPCs. Retailers moving quickly are being rewarded with the opportunity to test and gain market share at a lower cost.”

“Additionally, PLAs can be complicated to setup and require some technology sophistication on the part of the retailer,” he adds. “Besides setting up feeds and keeping the feeds updated in real-time, retailers must understand how to use consumer demand signals to optimize their feeds and bids. Most retailers will submit feeds and let Google do the optimization. These retailers are missing out on an opportunity to reach the right audience to get the highest return on ad spend. The smartest retailers will continuously optimize their product feed and unique product data, pro-actively manage their bids, and also leverage search query data to determine on-going refinements to investment.”

Google has done some things to simplify the product listing ad process. Here’s a video Google put out about the creation process in July:

“Retailers in commoditized categories will struggle the most as CPCs increase,” says Griffin. “Retailers with low conversion rates and low average order value will eventually be pushed out. Additionally, smaller retailers with low IT resources and/or agency support will struggle. Not only will it be harder for them to produce the right feeds, but it will be difficult for them to optimize them in real-time.”

When asked whether retailer size matters, he says, “I think conversion rate, average order value, technology aptitude, lifetime value, and retailer margins matter. Large retailers tend to be good in all of these areas, but there are exceptions. The winners will excel in all of these areas.”

One may wonder if Google will cannibalize its own paid search business in the rush to product listing ads. Griffin also shared some thoughts on that.

“In early studies, before the transition, it did not appear that PLAs were cannibalistic,” he says. “However, as Google places them in more prominent positions on the page, they will cannibalize some paid search traffic. Google is optimizing the page to have the highest RPS (revenue per search) and will rearrange the page in a way that drives a higher RPS.”

“RPS is determined by CTR of the ads on the page and the CPCs of these ads,” he explains. “PLAs currently have a higher CTR than traditional text ads. As CPCs increase, as predicted, Google will place PLAs in even more prominent positions. I do not believe Google is worrying as much about cannibalization as they are about continuing their efforts to constantly improve RPS.”

So what can consumers expect to see on both Google’s main search page and on Google Shopping?

“In the short term, I believe we’ll see a continued rise in prominence of PLAs on Google’s main search pages for commercial searches,” Griffin says. “They will continue to take over more valuable real estate as click-through rate and CPCs increase.”

“Regarding Google Shopping, Google’s intention is to become the default destination for online shoppers,” he says. “As such, we can expect that they will continue to invest in augmenting shopping pages with more information that customers find valuable. I think it’s reasonable to expect them to begin aggregating and showing product ratings and reviews, linking to product videos, augmenting descriptions, providing product recommendations, etc. If they want to be the default destination for online shoppers, they need to provide the richness of the experience that retailers are providing today.”

This whole thing sets up an interesting strategy in Google’s competition with Amazon.

“Both Amazon and Google want to be the default destination for online shoppers,” he says, pointing to this snippet of a recent New York Times article:

“In 2009, nearly a quarter of shoppers started research for an online purchase on a search engine like Google and 18 percent started on Amazon, according to a Forrester Research study. By last year, almost a third started on Amazon and just 13 percent on a search engine. Product searches on Amazon have grown 73 percent over the last year while searches on Google Shopping have been flat, according to comScore.”

Those are interesting numbers indeed. We talked about them in the articles Amazon Takes Competition With Google Up A Notch and Amazon Is Taking Searches Away From Google.

Even Google found that particular passage from the New York Times noteworthy, as Google D.C. guy Adam Kovacevich tweeted it:

“The changes in Google Shopping put Amazon directly in competition with Google over the attention of online consumers,” Griffin tells us. “Today Amazon monetizes searches through product sales, marketplace sales, Amazon MediaGroup and Amazon Product Ads. We can expect that Amazon will continue to invest in areas where they can link more consumers to more products and monetize related advertising.”

“Conversely, we can expect that Google will continue to invest in areas where they can further monetize searches outside of the existing PLA, display, and text-based search offerings,” he adds. “Google will need to compete on the quality of the entire shopping experience from search to delivery so we should expect to see them continue growing programs like Google Trusted Stores and Google Wallet.”

I’d wager that Google Offers will be an important product for Google in this area as well.

“Ultimately, this competition will be good for online customers as both companies will compete to make a richer experience for online customers,” says Griffin.

Earlier this month, Google launched the available of product level bidding to Product Listing Ads, so merchants can use it during the holiday season. This lets advertisers optimize bids for individual products and easily create product targets using the product ID in the Merchant Center feed to manage bids at the product level. More on this in Google’s help center.

What are your early impressions of the new Google Shopping? Share your thoughts in the comments.

Google Shopping And Its Impact On Online Retailers
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  • http://www.applecases.net The Hand

    This is not good for the end user, they are not getting the best result now on Google Products, they are only searching paid advertising, please please counting the days when another search company can compete with Google they are rapidly declining in search quality.

    There is now an importunity for Bing now to offer free listing to get a better high quantity products from retailers, but theyre hopeless

    • Ann Oliver

      Bing already offers free listing on their shopping section, don’t understand why more sites do not advertise there.

  • http://www.thehousesignstudio.co.uk Lady-a

    This has got to be bad news for small businesses, and for the consumer.
    Here in the UK, our high streets are monopolised by big business, international chains, with small independent retailers, pushed out of business by high rents and high rates.
    The same is going to happen now online, with only the ‘big boys’ being able to pay the price to show their products online.
    This can only mean less choice for the consumer, not to mention an end to some small businesses, who dont have a hope in hell of competing with these multi-national groups.
    As a small business, selling I’d be more than happy to pay a reasonable flat fee per month, but pay per click…. no thanks, been there done that, and never again!
    What’s going to be next from Google,top ten positions to the biggest paying advertisers?

  • JC

    An other way to control who gets what “nanny state, micro manage” call it what you will this is the most controlling way to dictate who gets the profits! it’s all about money! never enough! some how some way this must stop! free market? where? let me remind everyone that “big retailers” don’t save the consumer anything as their overhead is huge and someone has to pay for it! oftentimes the very small businesses are the ones who actually take care of the customer much, much better!at a lower cost.

  • Guy

    so we can expect how everything become more expensive in internet. thanks to google to increasing prices for us, putting margins in their pockets.

  • http://comfortwearables.com GC

    Just as predicted, large, well-funded retailers will dominate Google Shopping results, while small retailers are pushed out. Consumers will find less and less choice. Google Shopping used to offer a level playing field between large and small retailers, but no more. I’ve heard from many people who used to start their shopping searches on Google, but no more – they don’t like how the choices have been limited to big brands, and they can no longer find the unique products from small retailers they were looking for. The only small glimmer of hope for small retailers is to multi-channel their products to the large shopping marketplaces like eBay and Etsy which feed to Google Shopping and may get their products seen that way.

  • marcie

    The funny part is that most large companies are going to pay for ad no matter what changes are made, so it only really affects the small business guy. Like any retail business the rich get richer. What hurts as a consumer is that it will make it harder to find unique products that only the small business can offer…Sad

  • Terry

    At least “The Find” is still free, I get good traffic from them

  • http://umbrella-host.com/ Alex

    This is bad news for small businesses. How can they compete with such big players who have a never ending budget? The ‘big boys’ will not worry about CPC wheras the small business will think many times about even entering a market based on CPC. Tey another nail in the coffin for small businessess :(

  • http://damescribe.hubpages.com Gin

    I don’t think displaying paid advertisers first is good for anybody. I use Search for information, research from people and business not primarily for shopping. I didn’t mind business advertisers off to the side as has been the norm as long as I found what I was seeking through search.

  • http://www.rubylane.com/shop/christianridgecollectibles Betsy

    As a shopper, I am very unhappy with Google Shopping now. I collect vintage and antique Mexican silver jewelry. I used to get a wonderful assortment with a wide variety of sites.

    Now I only get Ebay and Etsy for vintage and page after page of modern drek made in China that has no relationship to my search. Utterly worthless now for either shopping or for searching and I plan to protest by not clicking any paid searches on any Google site.

    • Ann Oliver

      As a shopper I too am very unhappy with the changes, I used google to find certain items that I collect, vintage and antiques. Due to the changes Google is now completely useless to me as a shopper. And also used to use Google for many new products that are no available locally.

      I am switching to Bing and may also use Yahoo. Google no longer any value to me as a shopper, if I wanted to shop on ebay I would go to ebay. I do shop on Etsy but prefer to go directly to the site. Now instead of comparing at one glance everything that is available on the larger antiques and collectible malls such as Tias.com and GoAntiques.com I have to each site individually, very time consuming.

      Will never use Google again due to these changes and am urging all my family and friends to cease using Google, once the holiday shopping hits I expect that Google will hear many more complaints.

  • http://www.theresammoore.com TMoore

    As an independent author and designer I have a hard enough time reaching my customers as it is. Google has basically failed as both a search engine and an ad aggregator. I use Bing all the time now, and I don’t expect anyone to find my products thanks to Amazon, which buries everything under a thick layer of junk; or Google, which expects people to scroll down page after page to find me. The poop stops at the top. Stop clicking on ads and they will sit up and take notice.

  • http://www.prescription-safety-glasses.info Prescription Safety Glasses

    Advertisers pay Google to run their ads. Google runs their ads but also includes the “top” spenders in the Google Shopping. Then Google gets a “commission” on each sale through Google Shopping. Seriously, how long until Google is President of the United States? 5 Years? 10 Years?

  • http://www.graciousstore.com Nina

    It is all about the greed of the rich and big companies to swallow or marginalize the small companies to none existence.
    Google shopping is the worst thing that can happen to on line small business. They do not have the financial leverage to compete with the big companies.

  • http://www.ez93.com James

    The sooner Google collapses the better..20% drop in incoem and its shares suspended on Friday. I HATE GOOGLE you have no idea what that god forsaken company did to us. We had a good stabel business and 20 employees.. All down to panda ..And now this its hard enough to make a buck these days.. its another example of the big companies wanting it all .. GREEDY EVIL COMPANY = GOOGLE

  • Tominguez

    I had a few clicks the first week, after that, the price went 300% up and the clicks less productive. I guess all this shows in the last google stock price. Merchants and Publishers are not happy with this new paid model, is not realistic with what each individual site is doing, not everyone is Amazon or New York Times

  • http://shoptoolsshoptools.com/default.asp Sherry Gillis

    First, we have manufacturers and suppliers that are selling directly to the public using back-door websites. Now we have Google jumbling up their search engine and making it difficult to find products. People who have said Google is ruining small businesses all over this country are right – and nobody does a thing to help us. What is humorous about this is the fact that as a buyer, I can’t find what I’m looking for using Google anymore and have switched to Bing. I spent quite a bit of my time and money to put together a data feed for Google and when I had it perfected, they changed their model. When are people going to hit the end of the road with Google? I know I have.

  • AR

    In the quest for revenue, these paid sites are drowning small business who cant afford to compete with large corporations. They will figure out that eventually they will all hurt their businesses since each small business list will result in fewer dollars being spent online and in brick and morter stores.

    I really do think our country is on the verge of imploding. To many corporations running the show. People cant spend money when they are getting layed off and then their home based businesses are destroyed by the companies that layed them off in the first place.

  • http://www.microsourcing.com/disciplines/search-engine-marketing.asp MicroSourcing

    Large retail companies will keep on edging out the small players as they expand both online and offline. It’s inevitable because of the resources at their disposal, though fair competition can be compromised by such.

  • Watching the Wheels

    I wish that Google would stop their incessant dubious improvements, shifts in algorhythms, and all the other antics that keep ANYONE attempting to generate sales via the internet.

    All Google manages to accomplish is NEVER ENDING lost time for sellers who have to constantly play guessing games in an attempt to gain traction within this capricious site.

    Google is SUPPOSED to be a search engine.Instead they choose to operate a never ending game of 3 Card Monty.

    I am a small seller who has inventories within 3 online venue sites. I had put myself on a complete moratorium as far as doing anything as far as “self promo” activities, and kept detailed records for over a year of each venue’s overall traffic, traffic and sales for me on each site, because I was beyond tired of the vaguaries spewed forth by the Geek strata.

    Low and behold; Google got its way and the venues paid out, and all of them are showing improved site traffic.

    I LEARNED that “I NEED” to figure out how to neutralise Google’s influence. And Google, that means that ANY promo $$$ that I ultimately decide to spend will NOT be going to you.

    I don’t do business with manipulaters. I don’t do business with companies that think it’s OK to crap on the very people who are paying THEIR BILLS!

  • http://montazne-hise-on.net Alex

    This is bad news for small businesses.

  • http://luxe-immo.net real estate in morocco

    THANK YOU FOR YOUR SITE IS BEAUTIFUL

  • AZPurpleLady

    I agree with the comments already posted. This is a death toll for the small businesses online. I hope Google’s shares and income continue to drop. Maybe (but I doubt it) they will take notice. I understand it takes money to make money but the average small business will NEVER have the capital to invest the way the big guys do. Google wants to squeeze out the little guy…well it’s time for the little guy to put the squeeze on Google. Until this article I used Google as my search engine. Not no more. I’ll use one of their competitors.

  • dave

    This is not only bad for end users/shoppers, but devastating to start ups and smaller companies. Users go to shopping engines to find the best price, first and foremost (duh!). Moving to PPC will force prices upwards (duh!) so consumers will NOT get the best prices. Smaller companies compete on price point with the bigger ones to get customers – meaning smaller profit margin. PPC gobbles that margin up, fast, to the point where the smaller companies just abandon it as a marketing method. Consumers are stuck with the same old tired mega stores with high prices. Consumers eventually figure that Google shopping is a bad deal for them, so they go elsewhere to get “deals”.
    (duh!) – except maybe the dumb shoppers.
    In this economy, it’s PRICE, STUPID!
    If Google needs to pay for maintaining this service, we understand! MAKE IT A MONTHLY SUBSCRIPTION!!! Maybe base it on #of products in the feeds, bandwidth, or some similar model.

  • http://creatingawebstore.com/ Danny

    “The same retailers that thrive in paid search today will have the highest chance of being successful with PLAs,”

    Nothing new here. In the early days small shops (the few that participated) were able to get some decent exposure in Google shopping. Of course things changed later on when large e-tailors started dominating the results.

    No surprise:

    “By last year, almost a third started on Amazon and just 13 percent on a search engine. Product searches on Amazon have grown 73 percent over the last year while searches on Google Shopping have been flat, according to comScore.”

    Majority of commercial searches even in Google search are dominated by Amazon. Why go to Google when you can go directly to the source? I only go to Google when I am looking for new places to shop.

    I think the majority of Google searchers are like me — I don’t think they are looking for Amazon, Ebay, Walmart etc. For example, I used to monitor traffic for a couple of sites back when Google shopping was free and I used to see plenty of Google shopping referrals with “-ebay” in the query.

    For this reason, I think Google shopping would be better if smaller merchants would participate more.

    Pleasing consumers:

    Google shopping needs a larger selection of both merchants and items.

    Pleasing merchants:

    I think CPA would be better than PPC. This way merchants wouldn’t have to worry about listing only a small portion of their inventory. Focus on recruiting small merchants and make it a bit easier for them to participate.

    Also obvious:

    “Besides setting up feeds and keeping the feeds updated in real-time, retailers must understand how to use consumer demand signals to optimize their feeds and bids.”

    If I was submitting a feed, I would exclude items that have a low ROI due to this being a PPC model. Of course, if everyone did this, it would be more difficult for consumers to find what they are looking for in Google shopping due to the small selection. I don’t know how many would use this strategy but it’s something I did even with standard Adwords — I used to run exact match campaigns which converted well.

  • http://www.blazingseosoftware.com Roger

    I have a new solution for all store owners that use Google Shopping and since they represent the largest share of potential business, once you use it here it’s applicable for all comparison shopping portals. We just started so you will also have a “first to market” jump on your competition.

    Step 1: open an account with Google Merchant and get set up to feed your products daily to Google Shopping. It also now requires an Adwords account but at this time you can put in your settings to pay only $0.01 per click so there is very low risk (I’m doing it now as well with my store).

    Step 2: since Google Shopping, and all the other comparison shopping portals, are really all about the customer sorting by price and relevance, you must be the lowest priced vendor.

    We have just launched a new price optimization software that automatically adjusts your price to always be just below the nearest priced competitor without going below a minimum profit you set based on a multiple of your COG e.g. 130% of COG.

    If the nearest competitor is higher, the software will raise your price to be just below theirs since you are under pricing and leaving money on the table. Pricing can be a fixed dollar amount less or a percentage.

    You can try it for free for 15 days without providing any cc info. Check it out and let me know if you have any questions: www.blazingseosoftware.com

    FYI, I’m not a reseller, I’m the Owner. Feel free to contact me any time.

  • http://ephedrinewheretobuy.com Mike Budd

    Tell me about giants here: Google, Amazon, who else? I fear that small businesses have less and less chances due to the highly raising level of information and technology that is now required. At least I like it a lot when Google is speaking about this business, it makes it clear regarding values and priorities ;) That’s what I say to these managers I meet who tell me that their first priority is “happy customers”. Come on, let’s put it like that: would you like to have more customers and less money, or the other way around? ;)
    Cheers, Mike

  • http://www.fatlossonly.com Click Here

    I think it will be drastic for online retailers.

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