International sales increased an even faster 30%. The company also reported a record profit of $857 million during the second quarter and accelerated expansions ...
Google Shopping, rolling out now, promises to make Google Inc. an even larger player in e-commerce.
For the small but growing RiggingWarehouse.com, May was a very good month when it came to traffic gained via Google Product Search, perhaps its best ever. But then the drop-off began.
The online seller of chains, hoists, winches and related gear was attracting some 600 monthly clicks from its free product listings on Google Inc.'s comparison shopping service, but that sank to approximately 370 in June and about 200 in July, says marketing director Gina Donovan. The reason? In her view, Google's quickly moving, ongoing switch to Google Shopping, which replaces those free listings with paid Product Listing Ads.
Now comes the hard part: how to stretch her online marketing budget to reach potential consumers on the newest iteration of Google's comparison shopping service, and how to craft bids for Google Shopping to reach the right shoppers at the right time. For instance, demand for rigging equipment used in aviation, construction, factories and other industries can be affected by the weather, and Google Shopping is supposed to allow retailers to adjust bids based on such factors. But first Donovan has to find the money for listings that previously were free. "I'm at my max budget right now, and we are using any extra money to hire more people," she says. Google Shopping, introduced in late May and scheduled to supplant Google Product Search by early October, is provoking anxiety, confusion and, here and there, enthusiasm among retailers large and small. No one likes it when free becomes paid, but Google Shopping also represents another step for Google in combining search and commerce—essentially, to function not only as a search engine, but as a sales engine.
"The Google Shopping changes are some of the biggest changes in online commerce in some time," says Mike Effle, CEO of Vendio Services Inc., an e-commerce services provider that helps merchants sell through online marketplaces and comparison shopping sites. By his reckoning, 85% of Vendio's merchant base, and 80% of merchants in the Internet Retailer Top 500 Guide, have provided free product listings to Google's comparison shopping service, which was called Froogle when launched in 2002. "A lot of merchants are therefore being affected. These merchants were drawn by an online shopping audience that ranks behind only eBay and Amazon in visits."
That audience is not likely to disappear—after all, the new Google Shopping listings won't cost consumers anything to view. And that means retailers will have to learn quickly how to market effectively through Google Shopping, lest they lose sales during the important holiday season.
Google revs its engine
The starting point will be the same as with the expiring Google Product Search: Merchants will upload such product data as price, image and description to Google's Merchant Center. But then they'll have to bid for their listings to appear when consumers search on product-related terms, as they bid on paid search ads through Google AdWords. "Ranking in Google Shopping will be based on a combination of relevance and bid price," says Sameer Samat, vice president of product management, Google Shopping.
The paid comparison shopping model could boost Google's revenue by at least $250 million annually, says Scot Wingo, CEO of e-commerce services provider ChannelAdvisor Corp. That's hardly pocket change, though it pales next to Google's second quarter 2012 revenue of $10.96 billion, which was propelled by a 42% year-over-year increase in the number of clicks on ads that appear on Google search results pages, the company's prime source of revenue.
But Google mainly seems to want to make its search engine a more attractive place to start a shopping trip, and to stem the flow of consumers beginning their research on Amazon.com.
There's ample evidence that Google has been losing ground to Amazon among web shoppers. Clicks from Google Product Search to merchants monitored by Vendio declined 21% in July compared with a year earlier, Effle says. In July 2012, Google Product Search accounted for 18% of clicks and 28% of orders among comparison shopping engines. Amazon Product Ads—ads that appear on Amazon.com that take consumers to the advertisers' sites—were the only major channel to register gains in the Vendio study of online marketing channels, increasing clicks by 1.25% between April and June. During that same period, clicks declined 9.65% for Google.
And Forrester Research Inc. data show 30% of U.S. web shoppers began their product research on Amazon.com in the third quarter of 2011, up from 18% in the third quarter of 2009. That compares with 13% who began their product research at Google in third quarter of 2011, down from 24% in the same period in 2009. "While the phrase 'Google it' has become synonymous with researching things online, it should come as no shock if Amazon enters our lexicon in a similar way [for shopping]," Forrester analysts Sucharita Mulpuru and Brian Walker wrote in a report on Amazon in July.
For their part, Google executives prefer to talk not about Amazon versus Google, but how Google's new paid model for comparison shopping will help online shoppers and e-retailers. They argue that requiring retailers to pay for the Product Listing Ads on Google's comparison shopping service will encourage them to make sure their product data, prices and sales are as current and accurate as an up-to-the minute weather report—which, in turn, will help Google deliver better results to consumers.
"As an advertising system we need to be much smarter, and do a better job for retailers [by] sending more qualified clicks to them," Samat says. "Google Shopping will empower businesses of all sizes to compete effectively, and it will help shoppers turn their intentions into actions lightning-fast. The changes are a first step toward providing technology, tools and traffic to help power the retail ecosystem."