Google Shopping has been at the center of a lot of controversy since the company announced it in May. The paid inclusion approach has brought up Google’s old “do no evil” mantra, the FTC has been called upon to scrutinize the entire search industry on disclosure of paid results (which Google says it would support), and a lot of people are up in arms about Google removing listings for weapons.

Do you think Google Shopping is good or bad for e-commerce? Let us know in the comments.

The simple fact that Google has moved to a paid model (away from the free listing model of Google Product Search), however, is what really has a lot of merchants angry.

David Scarpitta, CEO of online retailer DasCheap, has gone so far as to issue a press reease comparing Google to a drug dealer, and indicating that he’s been forced to raise prices on his site.

“I hate to put it like this, but Google is acting kind of like a drug dealer,” Scarpitta said. “They let you try it free, then get people hooked and dependent upon it, and then you are forced to pay in order to survive as normal.”

“It’s a very sad thing,” he added. “Even here at DasCheap! we had to raise some prices in order to compensate for these costs. As so many web users use Google for accurate and instant shopping information, it has become a second nature to search there so we had no choice but to pay if we want to show our discounted items to the masses, otherwise we wouldn’t be able to show our discounted products to online users if we don’t pay. Essentially this forces us to raise prices across the board. So in essence, the finger points back to Google for the raise in retail prices. And even more unfortunate for other online retailers that can’t afford the extra expense will now lose an important revenue stream, that may put some companies in a bad state.”

While it’s certainly a good idea for a merchant to be easily found in Google, I’m not sure about the part about not having a choice. As sites who have relied on Google for the bulk of their traffic in the past have learned upon being hit by algorithm updates, it’s best not to put all of your eggs in one basket, and there are other ways to generate traffic to your site.

Apart from competing search engines, social media comes to mind, and can be effective with the right strategy. It’s also entirely possible to rank in the organic search results with the right strategy, without having to pay for a Shopping listing. People do shop from the regular results too.

One CEO told us that he sees Google Shopping as a very good thing for e-commerce. “We think this is the right direction for merchants and Google,” Amit Kumar, CEO Of marketing app provider Lexity, told WebProNews in a recent interview. “While the free Google Product Search program was great for some SMB retailers, in general the results were hit or miss – there was very little predictability on whether products would show up in search results, how often, and detailed statistics were not available.”

“On the other hand, our customers that participated in paid advertising through the Product Listing Ads program have much more visibility into how their products are faring, and have much more control (for instance, the ability to control which products get promoted more aggressively, which products should not be shown in Google’s search results, etc),” he added.

“In addition, having multiple potential display units showing essentially the same kind of products was very confusing to the users, and also to merchants who were trying to manage their presence on search results,” said Kumar. “Having all of these consolidated into one helps brands manage their presence better, and users get a better shopping experience.”

We’ve heard from plenty of frustrated merchants who express views more along the lines of Scarpitta’s. A WebProNews reader recently commented, “Many small companies have used Google ( Froogle, Base, Shopping ) as their resource for free advertising of their products. This is just an attack on those small companies and only allow companies who can afford to pay to do so.”

“I’ve always respected Google as a company for the great new technologies that they have implemented over the years, however I feel that there is a certain amount of greed here that will not only affect the grass roots retailer themselves but overall the consumer as well,” said Scarpitta. “Despite this grim scenario, we are going to do the best we can for our customers to continue to offer them the lowest prices and the best service in accordance with this new regulation in place. I hope others can do the same.”

Google says ranking in Google Shopping will be based on “a combination of relevance and bid price,” the same as Product Listing Ads today, and those who want to stand out can participate in Google’s Trusted Stores program and/or use special offers.

Google Shopping might be able to help out local businesses. Google certainly thinks it can. At its annual developer conference a couple weeks ago, the company hosted a session on empowering local shopping through Google shopping.

“More and more of consumers research online first before going to a local store to purchase a product and we can expect this trend to continue to rise,” the company said. “Local shopping enables merchants to declare product price and availability per local store.”

In the session, Google discusses how to set up and manage local shopping accounts in the Google Merchant Center, and how to ue the Content API to upload local products and do live inventory updates.

The transition from Google Product Search to Google Shopping is supposed to be complete in the fall. Merchants who create product listing ads by August 15% can get a 10% monthly credit of their total Product Listring ad spend through the end of the year, and current Product Search merchants can get a hundred dollar AdWords credit toward the ads if they fill out a form before that date.

Let us know what you think about Google Shopping.