Target and Toys R Us posted overall sales declines during the holidays.
In a major change, Google will phase out the free clicks on Google Product Search listings. Instead, retailers will bid for placement of their products in search results, in a new program called Google Shopping.
E-retailers can start saying goodbye to free listings on the Google Product Search comparison shopping service. In its place will come paid product listings ads through a new online program called Google Shopping.
Google Inc. today announced that it has begun testing and rolling out Google Shopping, which is designed to give shoppers more up-to-date information about prices and discounts, and give merchants more control over where their products appear, says Sameer Samat, vice president of product management, Google Shopping.
“Google Shopping will empower businesses of all sizes to compete effectively, and it will help shoppers turn their intentions into actions lightning fast,” he says. “Today’s changes are a first step toward providing technology, tools and traffic to help power the retail ecosystem.”
Google Shopping will be built on Google’s Product Listing Ads. “Ranking in Google Shopping will be based on a combination of relevance and bid price—just like Product Listing Ads today,” he says.
Instead of bidding on keywords for paid search ads, merchants buying Product Listing Ads bid on the amount they will pay if their product listings in search results attract clicks or result in sales; retailers have the option to select a cost-per-click or cost-per-acquisition model, a Google spokeswoman says. Product Listing Ads can include a product’s price, an image and the name of the retailer selling it.
“This announcement represents a fundamental shift in how Google participates in the e-commerce market,” says Eric Best, CEO of Mercent Corp., which helps retailers sell online through marketplaces and comparison shopping engines, and which today released software to help retailers sell through the new Google format. “Previously, Google monetized shopper traffic. Google is now directly monetizing shopper intent. Retailers will need to manage and optimize Google Product Listing Ads with the same sophistication and technology they apply to their AdWords campaign.”
Google plans to test and roll out the new format over the summer and complete the change during the fall, Samat says. To help make sure the launch goes smoothly, Google is offering merchants that create product listing ads by Aug. 15 a monthly credit for 10% of their total product listing ad spend through the end of 2012. Google also is offering merchants that now take part in Product Search $100 worth of credit toward the product listing ads.
Google says that consumers using Google to shop will soon be seeing a revised format, as the search engine experiments with how it lists the product information and ads for consumers doing searches. For instance, a shopper looking for a tent now generally sees paid AdWords ads at the top of the search results page, followed by free search listings and free Product Search listings.
According to an example provided by Google, the new format might include fewer AdWords ads at the top, followed immediately by paid Google Shopping listings—that is, images of five tents with their prices and links to retailers below the pictures—and which are labeled “sponsored.” Immediately below the row of tent images are links that will enable shoppers to browse by tent type—for instance, by clicking links labeled “backpacking,” “ice fishing” or “mountain.” Below those links are free search listings.
“While Product Listing Ads and Google Product Search results are now separate, they'll be combined into a single Google Shopping box in the new [format],” a Google spokeswoman says.
Consumers also might see a larger ad along the upper right corner of the search page that displays a larger product image and information such as customer ratings, a line or two of product description, price, and links to retailers selling the product. And as it prepares to roll out the new format, Google also is encouraging merchants to take part in its Trusted Stores program. Merchants can display a digital badge that shows consumers such customer service data as average on-time shipping rates, along with a guarantee that if an issue arises with the order Google will work with the e-retailer on the customer’s behalf to address the problem.
In the United States, Google Product Search drives about $650 million in annual sales for online retailers, estimates Scot Wingo, CEO of e-commerce services provider ChannelAdvisor Corp., whose services include helping retailers sell on such online marketplaces as Amazon and eBay. “The cost of using Product Listing Ads to replace those sales is $130 million per year,” he says. “Every retailer needs to quickly assess the impact and start planning their mitigation strategy, as this has the ability to disrupt annual revenue plans and spend plans dramatically.”
Globally, Google could earn up to $250 million annually from the new program, Wingo says. “Google says these changes were made to improve the user experience,” he says. “Since this will be a paid program, I believe the [product] selection will go down dramatically.” He says retailers will send to Google only data about items that they believe will lead to enough sales to offset the fees Google will charge, whereas now many retailers send Google data about all their products because Google has not been charging for clicks on Google Product Search listings.
Best, from Mercent, said retailers eventually should benefit from the new program and its focus on paid listings. “It ultimately creates less competitive noise and more overall volume for retailers—at a price,” he says.