Say what you want about Google's transition from the free-to-list Google Product Search to the paid inclusion model of Google Shopping, but the product listing ads (PLAs) that Google Shopping is based on are performing quite well.
Have you seen improved performance with PLAs? Let us know in the comments.
A new Kenshoo report about global online retail in 2012, covers search advertising trends around the world. The firm analyzed data of its own clients, which include advertisers and agencies, managing paid search programs for the retail vertical across Australia, China, France, Germany, Japan, the U.S. and the U.K. They tracked impressions, clicks, conversions and revenue for over a year - from November 2011 to December 2012.
The analysis spans all major retail categories including (but not limited to) electronics, books, apparel, appliances, shoes and sporting goods. It also includes over 24 billion paid impressions and clicks on search engines including Google, Yahoo, Bing, AOL and Baidu, delivering over $1.7 billion dollars in revenue. Suffice it to say, it's a pretty comprehensive data set, and I encourage you to read the report (pdf) in its entirety.
The Google Shopping model has not rolled out to all markets yet, so the Product Listing Ads data is all from advertisers in the U.S. The comparisons of PLAs to text ads come from the same advertisers, but they exclude seasonal, special promotion, and brand campaigns.
According to Kenshoo's findings, "eye-catching" PLAs draw about one and a half times the clickthrough rate of regular text ads, and convert 23% better, resulting in a 31% higher return on advertising spending (ROAS).
"It is interesting to note that CPC remains low as competition for PLAs is currently less than other ad formats," the firm says.
"Looking at how PLAs performed in the U.S. during the entire holiday season, we can see that ROAS spikes on Black Friday and Cyber Monday," Kenshoo adds in the report. "We also see that PLAs maintained a very high ROAS for the first three weeks of December and the format seemed much less prone to the weekly fluctuations that we saw from the overall holiday numbers including paid search text ads."
The move to Google Shopping has been a controversial one for the company. Competitors have repeatedly spoken out about Google's paid inclusion model. TheFind CEO and co-founder Siva Kumar recently told WebProNews, “Google’s switch to an all-paid model is likely to confuse many consumers who will no longer see every product for their search, but will instead only see paid placements. It will be interesting to see how Google communicates this change to consumers who have come to trust that search results are a combination of ads and organic results.”
Bing has gone so far as to create a whole campaign called "Scroogled" to disuade users from buying into Google's new model.
Not all of the criticism has come from competitors though. One CEO even compared Google to a drug dealer over the move.
Even former Googler Vanessa Fox, who created Webmaster Central, told us in an interview, "I’m not super happy about the shift to paid placement in product search. I can see the rationale of why they did it, but doesn’t reflect the stated mission all that well.”
Based on Kenshoo's report, businesses are still getting quite a bit of value out of the product listing ads.
“The same retailers that thrive in paid search today will have the highest chance of being successful with PLAs,” said Michael Griffin, founder of Adlucent, which exclusively managed Amazon’s paid search until Amazon took it in-house in 2009. “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.”
“Retailers in commoditized categories will struggle the most as CPCs increase,” Griffin told us. “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.”
Google made the full transition to the Google Shopping model in the U.S. in October, and announced the following month that it was beginning the gradual rollout in the United Kingdom, Germany, France, Japan, Italy, Spain, Netherlands, Brazil, Australia and Switzerland. Google said users in these countries would start seeing the new results on February 13.
In December, Google said it would be releasing a new set of Google Shopping program policies in January, as it announced that it is offering promotional credit to merchants in Australia, Japan, Brazil, Italy, France, The Netherlands, The UK, Germany, and Switzerland to make the transition to Google Shopping as it rolls out to these countries. We've yet to see the new policies so far.
Google recently launched some social features for Google Shopping, including the ability to read reviews from people you know and the ability to share reviews with friends on Google+. The company also added tools for 360-degree product images, shortlists and discounts/promotions displayed on products. More on all of that here.
Have you used Google's Product Listing Ads? Have you seen a noticeable difference in your CTRs? Conversions? Let us know in the comments.