Google Shopping And Its Impact On Online Retailers

    October 22, 2012
    Chris Crum

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 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.


Chris Crum
Chris Crum has been a part of the WebProNews team and the iEntry Network of B2B Publications since 2003. Follow Chris on Twitter, on StumbleUpon, on Pinterest and/or on Google: +Chris Crum.