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Google Shopping Listings Will No Longer be Free to Advertisers

A major announcement from Google today portends significant ramifications for retailers, search marketers and managers of Comparison Shopping Engines in the days and months ahead.  The change will find Google monetizing a popular product, and it immediately raises a slew of questions, both practical and academic.

What’s the change?

Google Shopping is transitioning from being a free CSE to being a 100% paid product. The shift will take place beginning in June with plans that it be fully completed by the fall. During the transition period, advertisers already investing in Product Listing Ads (PLAs) will begin paying for and qualifying for the Google Shopping auctions.

According to our discussions with Google, sellers utilizing Google Shopping without adopting PLAs will continue to receive free clicks on Google Shopping for some percentage of the auctions (near 100% at first), but by fall, all listings on Google Shopping will be paid advertisements.

At that time, Google.com PLAs and Google Shopping results will both be driven by the same platform within AdWords, where advertisers can set unique bids and marketing segments (geography, time of day, query negatives, etc.).

As an incentive to adopt PLAs, Google will offer two promotions:

1)     Current sellers on Google Shopping can receive a $100 AdWords credit if they become a new PLA advertiser. This seems to be Google’s “thank you” gift for working with them through this transition.

2)     Any Seller on PLAs prior to August 15th will qualify for a 10% discount on all paid clicks received from PLAs on Google.com and Google Shopping.  The discount will apply from July 1 through the end of the year.

Assessing the Potential Impact

Among the clients for which RKG manages both paid search and CSEs, we find that Google Shopping click levels are between 7-8% of those for Google AdWords paid search ads, on average in Q2.  Whether those levels hold up is a big question.

Currently, Google Shopping results often appear smack in the middle of the standard SERP, but we hear that will no longer be the case.  Instead, Shopping results will appear above the organic listings in order to avoid mixing paid and unpaid results and giving the impression of deceptive paid inclusion.

A typical Google SERP, currently

Moving Google Shopping results out of the middle of the page and reducing the real estate devoted to them and PLAs seems likely to hurt their current combined click-through rate.  So, Google is probably looking at a 2+2 = 3 situation, at least in terms of traffic levels.

How the paid Google Shopping format will look

There’s also the question of how cost-per-click will turn out for the newly merged Shopping/PLA product.  In our quarterly Digital Marketing Reports, we’ve spotlighted the rapid growth of the Product Listing Ad format, but also noted that CPCs for PLAs tend to run about 20% lower than comparable text ads:

The key word is “comparable.”  PLAs have an average CPC that is on par with our average overall CPC, but they trigger almost exclusively for non-branded search queries, which have a higher than average CPC.  To the extent that PLA clicks replace higher priced clicks on standard non-brand text ads, they have been a drag on Google’s overall CPC.

Google Shopping traffic does convert better than the Product Listing Ads format, so that should drive up bids for the new combined format.  Our results suggest that the bid increase for PLAs would be in the neighborhood of 10-20%, but there is likely to be some inertia there as bidding for PLAs across the industry is less sophisticated than it is for standard paid search ads.

Google’s 10% PLA discount will also have a material effect on their bottom line for the second half of the year.  In the end, don’t expect this change to lead to a sharp turnaround in Google’s year over year CPC growth.

Other Practical Questions That We Asked

Q: Currently negative keywords work for AdWords PLA campaigns. Will they also work for Google Shopping queries?

A: Yes

Q: Currently clicks on Google Shopping are directed through the Merchant Center feed column titled “link”. However, PLAs for RKG are directed through a special column “adwords_redirect”. Which one will be used in the future?

A: adwords_redirect

Q: Will we be able to see PLA traffic segmented by Google.com (Core Search) vs. Google Shopping in the AdWords UI?

A: No

More Questions Remain

RKG has managed PLAs for dozens of clients and we were an early adopter of the product back in November 2010. PLAs have been a very strong product addition for Google.com. The new ad format has driven incremental traffic at ROI positive levels for the past one and a half years.

That said, we’re a bit uncertain about the full impact of the move to drive Google Shopping listings by PLAs, because there are still a number of unanswered questions.

1)  How will this change the ability for consumers to compare pricing from various sites (traditional model for Comparison Shopping Engines)?

2)  Is Google seeking to eliminate small sellers from Google Shopping results? One could argue that only allowing stores that are capable of engaging in pay-to-play for listings will provide a better user experience by minimizing the set of low quality or “unreliable” sellers.  That seems to be one of Google’s arguments, at least.

3)  Will advertisers begin to pay more attention to the content they’re providing in the Shopping feed, now that they’re paying for the clicks? If yes, will the Google Shopping engine become more useful?

4)  How will Shopping listings change once AdWords’ trademark policy becomes the law of the land? We’ve seen many instances where the stricter AdWords policy has prevented a PLA from being eligible for display, but there were no issues with the same product for the Shopping results.  From what we’ve seen, this could reduce Google Shopping listings in the neighborhood of 10%.

Forcing CSEs and PPC Under one Roof

Google Shopping represents one of the largest Comparison Shopping Engines while Google AdWords holds a dominant position over its rivals in paid search.  As they have become more and more intertwined — even before this change — there has been a growing need to have paid search and CSE management under the same roof.  With this change, Google is forcing the issue, but that’s not necessarily a bad thing.

CSE managers know how to optimize a feed for maximum visibility (or invisibility) of products. Depending on the sophistication of the provider, they should also employ strong bidding logic to maximize ROI and scale at the same time.  Search marketers  are extremely familiar with AdWords and segmenting ads to the right audience, at the right bid.  Managing additional PLA traffic fits right in line with SEM core competencies.

Combining CSE and PPC management can eliminate duplicated efforts and create efficiencies across both.  Coordinated tracking parameters help advertisers optimize ad segmentation, while consistent reporting methods ensure apples to apples comps.  Also, orders with touches from both channels can more easily be de-duped when managed by the same provider and the knowledge gained from either channel is more likely to flow to the other.

The Bigger Picture

Today’s announcement is sure to reignite the debates around paid inclusion, whether Google is using monopoly power in one industry to gain an advantage in another, or even just plain being “evil.”  From the retailer’s prospective, it’s easy to view this as just a revenue grab by Google, but there shouldn’t be an expectation that Google continue to deliver free CSE traffic in perpetuity.

Although we’ve often found fault with Google decisions, RKG has generally expressed a laissez-faire attitude toward their ability to control their web properties in the manner they choose, except for certain practices like using content from those who have expressed an unwillingness to allow it.

It’s an old argument, but if a particular Google change upsets users enough, the cost of switching to another search engine is zero.  Also, whether Google Shopping is paid or not, it still competes with other CSEs and Google makes a strong argument that users increasingly expect more than just ten blue links in the SERP.  Whether the government will see it all that way is another matter, but Google appears willing to have that fight, if necessary.

  • Mark Ballard
    Mark Ballard is Director of Research at RKG.
  • Comments
    23 Responses to “Google Shopping Listings Will No Longer be Free to Advertisers”
    1. Matt, as you and I discussed: “Imagine the check Amazon will now have to write to Google for all those clicks that used to be free!”

    2. Thank you Google… You just made Goodzer look even better now in the eyes of the independent retailers.

    3. John Ellis says:

      Thanks for the article. Any word on how or if this will show on mobile?

      -John

    4. Adam Audette Adam Audette says:

      I remember talking with some of the Amazon team a few years back about Google Shopping. They were super concerned about the feeds going to Google and that they’d pull the rug out at some point. Amazon sees Google as their primary competitor and they were just waiting for a move like this. Game changer!

    5. Fortunately there’s a massive new DR channel coming online in the next couple months that will serve as an effective ROI outlet for some of this now-costly spend. George, let’s talk at SMX Advanced next week…

      Great, great blog post again, guys. RKG should win an Oscar for best SEM blog!

    6. Brian Fosse says:

      Making Product Search pay-to-play should provide a better experience for users and merchants alike. As a merchant I believe it will help to eliminate price erosion and IMAP violations by “unreliable” sellers, possibly pushing such sellers out of the market entirely.

    7. Really interesting point, Brian. There is always tooth gnashing associated with “the little guys” getting squeezed out, but a) many of the “little guys” are thieves, and b) the user doesn’t necessarily care to shop from mom and pop online for the same reasons that the big boxes are winning in retail.

      Chris, I’m not going to Seattle this time, but happy to hear you out with a firm understanding in mind of what a marvelous salesperson you are :-)

    8. It is one more action from Google to shrink the web toward Google SERPs.

      It will sure means more reliable Merchands but at what cost. Although the biggest impact could be for the other shopping comparison sites that will need to stay niche and get a stronger audience/follower.

    9. Tim says:

      With Google taking making shopping experience pay-for-play in the best interest of the users, what about organic results in the SERPs – for search terms that have enough relevant paid advertisers could the same argument be made, drying up the organic channel?

    10. Does this mean that products that fall into Google’s “restricted Items” for adwords, such as firearms and tobacco, will now be excluded from Google shopping? If so then this is unfortunate, as every time I tried to sell items, even accessories such as optics, that are firearms related my ads were rejected.

    11. Mark Ballard Mark Ballard says:

      David, yes the AdWords policies will apply to the new Google Shopping results, so if an item is currently being disapproved from AdWords/PLAs, I would expect it to be disapproved for Shopping.

      Tim, although Google has certainly moved in that direction over the years, I don’t think we’ll ever see them populate their SERP entirely with paid listings for any query. There’s a difference with the Shopping product, where the user expresses a clear commercial intent just by using it.

      John, I haven’t seen an example of exactly how this change will manifest itself for mobile, but I wouldn’t expect any dramatic change in how the Shopping listings appear to users.

    12. Nick Craig says:

      A few of our clients in the UK attract in excess of 30% of their traffic via Google Shopping so we’ll be having some interesting conversations over the coming months.

      As a general view, however, this is the kind of thing we’ve seen coming for a while now and we’re thinking about three long-term rule predictions:

      1) to continue to attract free traffic from Google, you must provide a remarkable experience for your users.
      2) if you make money from Google traffic, expect them to take a cut
      3) view SERPs as you would a commercial property, and view Google’s aim as to maximise the value of their properties.

      I’ve used the commercial property analogy with a couple of people recently and it’s a useful tool to illustrate that Google’s stance is (in a way) no different to a shopping centre/mall owner charging their tenants rent, and viewed like that it makes for some common sense, much as we marketers might think otherwise!

    13. Hendrik says:

      Mark and Matthew, firstly thanks for an excellent post and you raise some excellent points.

      George, Amazon is at the moment spending $55.2 Million on Adwords (source: http://www.wordstream.com/articles/google-earnings) . I agree with you that their costs will increase and am leading to think that the check will now be upwards of $80 Million per annum.

      I have an axe to grind with Google as I believe the user is being used as an excuse. Why does the user now suddenly matter and the merchant have to pay for a better experience. PR spin is the best I can come up with. The truth is that Google wants to make more money from all their various divisions and shopping has been riding on the coat tails of their profit making machine called Adwords. If they are serious as they claim to be then they need to ensure that they enforce the feed specifications. They have not done so (www.cpcstrategy.com/blog/2012/02/google-warns-against-missing-tax-and-shipping-info-again/) and have lead to a lot of poor quality results getting traffic from Product Search.

      I disagree with your assumption that CSE and PPC management should be under one umbrella. As someone who works in the CSE space I dont think PPC management is to be considered to be similar at all. I agree that data is king in both cases and it needs constant optimisation to ensure campaign success. The difference is what Google has done with Comparison Engines. They are not allowed to list in Product Search as it is a breach of the terms and conditions of Product Search yet when i view product data inside Google Product Search from outside the US I get Adwords from Comparison Shopping Engines. Huh? You are not allowed to list your products yet we are allowed to show your ads and make money of them.

      Secondly and this is a huge concern for me is that this new Google Shopping is going to lead to the big getting bigger and the small will disappear. We are all educated that ecommerce is to be the the equaliser between large mega retailers and small mom and pop shops. Yet, looking all over the web, I see a lot of concern. Will this announcement lead to investigations by the FTC, i tend to think so.

      One other thing, most retailers have used schema in some way or form over the last 12 months so Google knows alot more about your catalogue then just your ads.. If I may, if Google Shopping does happen which most probably will happen due to lobbying I get the idea that we might begin to see the beginning of the end of the PPC model. Google has the potential to now go to the Cost Per Acquisition model as these optimised data feeds will provide them with all of their data needs which schema might not have done.

      What is in it for the small merchants if this pay to play situation happens? Agencies and SEM companies will get more work but conversions I believe will get less which will lead to a bidding war which will lead to a ghost town for certain ecommerce industries. As long as the own organic search results, we are all at their mercy….

    14. Mark Ballard Mark Ballard says:

      Thanks, Hendrik. I doubt we’ll ever see Google cite raising their revenues as a reason for a change like this, but clearly that’s a big, if not the primary, factor. That said, I do think their official line that this will lead to an improved user experience does hold merit. Sure, there’s a great deal they could do to improve the quality of their listings without moving to a paid model, but why would they go through that trouble when they think an auction can sort it out for them and make them more money to boot?

      We work with a wide array of companies, big and small, so we’re sympathetic to concerns across the spectrum. I think smaller businesses should still be able to compete under the paid Shopping model, particularly if they optimize their feed well — leading to higher click-through and conversion rates. The ad auction benefits those who are strong on both counts and bid accordingly, which isn’t always the biggest players. In other words, even small retailers can benefit from the elimination of low quality competition. That’s the hope, at least.

    15. Jordon says:

      Positive: Overall this will be good for the consumer and the marketer. BizRate, Shopping.com, Shopzilla, etc are all a pain to deal with as a marketer – unless you use a 3rd party to deal with the feeds. I’d be happy to see Google steal more of their market share. Plus, adding the bid factor should help small players compete a little more with the big guys who owned the shopping listings.

      Negative: Having worked with many small businesses in the agency setting, I know many of them will freak out when you now have to pay for what used to be free. For many SMBs, Google Shopping was a good way to test the water in “marketing” or to combat marketing fees with a free channel. I can definitely see this hurting small businesses.

      Neutral: Google is a business. It seems like so many people forget that. This should be another good source of revenue for them…especially for the guys like Amazon, Best Buy, Target, etc.

    16. Adam says:

      Is there any indication if Google will augment their tools to deal with feed optimization and bidding? From what I can tell from PLA, the bidding mechanism is pretty basic (I’m not an expert). Will the reporting and management tools in place now to manage PLA’s be effective at managing the quality of the feed?

      Also does Google allow management of PLA bids/filters (and soon Google Shopping) via API?

      Thanks RKG

    17. Hi Adam, I’ll try to tackle your questions one at a time:

      - Will Google augment their tools? – I wish I knew. I do not think they will make many changes to the Merchant Center side (feed). I think (hope) they will try to allow for greater bulk control in managing Auto Targets (Product Filters).

      - Will bidding change? – I do not think so. Bids will likely remain inside of AdWords and not on a per product basis in the feed.

      - Will reporting/tools be effective? – We believe there are enough controls to manage PLAs effectively. Back in 2010, this was not necessarily the case, but Google has made great improvements in tracking and API updates since then.

      API details for PLAs can be found here:
      https://developers.google.com/adwords/api/docs/reference/latest/AdGroupCriterionService.Product
      It’s important to note the many “names” for PLAs on Google’s end – PLAs, Product Ads, Product Filters, Auto Targets.

    18. Ben says:

      One thing that can be done is to bid everything at a penny. Costs will remain fairly low for most, but their results will be included. They never did say how much needed to be spent, only that spending is required.

      However, at our business, even that would be ridiculously expensive. We sell automotive. In our industry, one product can have 2000 part numbers each with their own individual price. We have about 600 listed on our site at the moment and it adds up to about 75k part numbers. Even at $.01 hat’s potentially $750+ a month if each was clicked once as I understand the pricing.

      We have 1000s of products to put out on our site yet and that means that the 75k could balloon to a million or more part numbers.

      When margins are so low in the automotive industry and everyone expects free shipping, even on heavy items, there really isn’t a whole lot left to pay that kind of money. Add in price and bidding wars, this could get ugly. Plus, how do you manage that volume of ppc?

    19. Brenda says:

      Hi Matthew,

      Do you have any idea on what pricing for products will be? How do we know what amount to bid at in order to show impressions? Or do you have any best practice tactics to share with bids? I’ve gone back and forth with Google and they don’t seem to have an answer. Thanks!

    20. Joe Amadeo says:

      Has anyone actually looked at this? It REQUIRES you to use what we have found to be the most incredibly inefficient ROI generating “Product Listing Ad”. YOU DO NOT CREATE THIS AD like text ads. These ads are generated by Google criteria as follows: “Product listing ads automatically include relevant product details from Google Merchant Center…” We tried these for a moment in time. And the Google criteria we found to be most dominant were the generic references in the ad group, i.e. table, clock, chair, mirror, chest, comforter, weather, etc which do not narrow the customer’s real, specific interest. We, therefore, cannot participate in this as we have already discovered that its function generates a terrible ROI for us.

      It appears to us that Google is not the holistic, honest search company we thought they were. Google’s seemingly complete disregard for small businesses caused us pause several years ago when they eliminated thousands of positive reviews of our sites in Froogle/Google Shopping. They cared not a lick about the fact that we suddenly looked like newbies in the marketplace instead of an experienced, respected and trustworthy site(s). That really helped destroy our growth and compelled us to try paid customer ratings. We suspected that Google may own part or all of these companies by holdings, investments or proxy.

      Then, the changing of Google algorithms by Google, ostensibly to promote honest and accurate search results had a tremendous impact; loss of traffic. So, we were compelled to spend huge amounts on SEO and paid review sites like Reseller Ratings, both of which failed miserably. The squandering of profits because of what we feel were Google’s intentional actions damaged our cash flow badly.

      And a funny thing occurred in tandem with all of this. We had to spend more on AdWords to compensate for loss of traffic! And we thought the Google algorithm changes were intended to serve honest search results. How naive we were. It seems clear to us that Google is simply manipulating organic and/or shopping feed results in order to ensure growth of AdWords expenditures. And now they’ve just taken it one step further, seemingly intent on compelling retailers to purchase what we see as their worst performing, but great cash generating, generic AdWords Product Ads in order to get any type of Google Shopping listing.

      Now with this debauchery, I think the only question remaining is how low they will finally go. I wish someone hadn’t suggested paying Google to index pages on the Google Commerce blog that is now blocked for publishing of replies or new comments. This revenue enhancement idea has probably gone right into the “future marketing strategies” box at Google. Why don’t they just cut to the chase and start the bidding for “organic” search result positioning? The definition of “Organic” needs be changed from “natural result” to “serving the cash organ” at Google.

      We feel that Google Shopping will now become largely irrelevant as the number of “participants” will definitely plummet. Only the biggest companies will compete in a lousy ROI environment. Small business cannot afford lousy ROI. I’m not sure how we are going to proceed, but recognition of the seemingly outright, blatant betrayal of the small businesses that Google built its business upon certainly exacerbates the alienation and distrust that we have increasingly felt over the past 3-4 years.

    21. I hear you, Joe, and understand the challenges you folks face. It is easy to point the finger at Google, here, but I think the reality is that Google is a mass market channel. Those who have the greatest success in AdWords, in SEO, in Shopping are businesses that cater to the masses. Businesses like yours that aim at the high end of the market face the challenge that most users are looking for Costco-caliber furniture at those kinds of prices. You’re going to have to win at the long tail with qualifying keywords (designer, quality…).

      We’ve had a ton of success with PLAs being both high in traffic quality and quantity, but for advertisers in the mid-market sweet spot. You can apply negatives to PLA campaigns, and maybe the game for you is to use a ton of exact match negatives on general keywords (clock, furniture, desk) as well as more typical (cheap, discount, etc).

      Good luck to you, sir!

      George

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