Google has an official policy against one form of arbitrage and generally seems to do a good job enforcing it. However, a new twist on an old strategy appears to fall outside the purview of that policy and it could be driving up your click costs.
According to the Google policy:
Google AdWords doesn't allow the promotion of websites that are designed for the sole or primary purpose of showing ads. This practice of promoting sites where the main purpose is to get users to click on ads is called arbitrage.
We've created this policy to help users get unique and useful information without obtrusive advertising.
But what if an outfit didn't need to send users to an intermediate page of ads in order to capitalize on the price difference between two clicks? What if a single click encapsulated both the buying low and selling high instantaneously, eliminating any risk in the arbitrage process? That's a pretty sweet deal, if you can get it.
And that's exactly the deal Shopping.com appears to be getting with Google Product Listing Ads (PLAs). We first noticed this around the time Google began the transition to power Google Shopping listings with PLAs. Our clients products were showing, but in some cases, rather than our normal URL, we saw clicks being channeled through a DealTime.com address (DealTime is now a service of Shopping.com, but was actually its predecessor. Both are owned by eBay.)
Essentially, they are taking product feeds provided to them for running listings on their service, turning around and using them for Google PLAs. In doing so, they are driving up CPCs for some of the exact same PLA clicks the advertiser would otherwise be generating for themselves. How?
These arbitrage opportunities can come up for a number of reasons, but one of the biggest factors is that advertisers can create much more precise product segments with PLAs versus the comparatively broad bidding categories on Shopping.com. So, we might be willing to pay Shopping.com a $0.40/click minimum for a given product category, but we know individual products within that category would be more profitable at a $0.30 bid, which we can do on Google with the flexibility of PLAs.
Shopping.com doesn't know our PLA bid, but they could simply decide to run every product in our feed as a PLA at $0.05 off our Shopping.com bid and see how many nickels they can collect in the process. In those cases where Shopping.com's PLA bid exceeds our own, they will beat our listing in the auction and, if they generate a click, take a nice percentage for themselves. Another concern for advertisers is that Shopping.com will not accurately or effectively leverage the promotional phrase option available for PLAs.
Now, one critical question is whether Shopping.com is actually providing a benefit to advertisers by giving them a second product listing they would otherwise not receive. In the screenshot above, we clearly see two listings for the same company, one provided by that company itself and one by Shopping.com. However, unlike standard AdWords text ads, there does not appear to be a hard limit to the number of product listings the same advertiser can have for one result. We have seen a number of cases where the same account triggered multiple PLAs for separate products on the SERP:
To their credit, Shopping.com has been very responsive when we have requested, on behalf of individual clients, that they cease this practice. Unfortunately, we don't manage the CSE relationships for all of our clients, so this issue, and the confusion and consternation it can raise, continues to pop up.