Today marks the end of free ads on Google Shopping. Going forward, Google plans to populate Google Shopping results and ads with paid Product Listing Ads (PLAs) managed through the Google Merchant Center (GMC) and AdWords. This move is Google’s latest maneuver in an on-going chess match against Amazon. Product searches on Amazon have grown 73 percent over the last year while searches on Google Shopping have been flat, according to comScore. As Adlucent Founder, Michael Griffin, was quoted in the New York Times, “Google and Amazon both have the same end goal, to be the destination that people go to do their product searches, and Amazon’s winning that battle.”
The changes to Google Shopping have proven to be mostly positive, thus far. PLAs launched late May 2012, most likely contributing to the 42% YoY increase in paid clicks that Google reported for Q2 2012. Adlucent has seen undeniable upside for their retail clients investing in PLAs; CTRs about 20% higher than general paid search and CPCs are 15-25% lower. We have also seen 20-30% more YoY traffic driven from paid ads versus the free Google Product Search listings. Ad spend increases have followed the performance trend, increasing an average of 65% MoM since May.
There are some looming unknowns as the Google Shopping transition plays out; which retailers will thrive, will the SERP continue to change shape, and what will be key competitive next moves made by Google and Amazon?
Our founder Michael Griffin had a conversation about the transition with Web Pro News today. His big points:
Great Retailing is Still Great Retailing
We believe that the same retailers that thrive in paid search today will have the greatest chance of succeeding with PLAs. Those that can most efficiently attract and convert the most valuable customers will derive the most value. With PLA CPCs lower than paid search CPCs at the moment, retailers moving quickly are being rewarded with the opportunity to test and gain market share at a lower cost. But, we expect CPCs to eventually be 15-20% higher than paid search CPCs.
This certainly does not mean that only large retailers with the largest budgets will prevail. We see smaller retailers who work to understand their customers’ intent and ensure their products are optimally matched can successfully compete in their category and use search as a key tool to grow their customer base and overall business. The key is to continue to run a strong retail business, concentrating on improving conversion rate, average order value, margins and overall lifetime value.
The SERP Continues to Evolve
Google will continue to test and optimize the page to have the highest revenue per search (RPS). RPS is determined by the CTR of the ads on the page and the CPCs of these ads. PLAs currently have a higher CTR than traditional text ads. As CPCs increase, as predicted, Google will place PLAs in even more prominent positions. As this occurs, PLAs will cannibalize some paid search traffic, but the overall ROI of the RPS increase will be of higher value.
The Battle for Shoppers Will Continue
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. This would include growing programs like Google Trusted Stores and Google Wallet to raise the quality of the entire shopping experience, from search to delivery
Ultimately, this competition will be good for online customers as both companies will compete to make a richer experience for online customers.