Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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Merchants buying Product Listing Ads bid on the amount they will pay if their product listings in Google Shopping attract clicks or result in sales—that is, on a cost-per-click or cost-per-acquisition model. Product Listing Ads can include a product's price, an image and the name of the retailer selling it.
Here's an example, based on information provided by Google, of how Google Shopping will change what consumers see: A shopper submitting a search at Google.com for a tent prior to the wide rollout of Google Shopping generally sees paid AdWords ads at the top of the search results page, followed by free search listings and the soon-to-be expired free Product Search listings. The new format may mean consumers see fewer AdWords ads at the top, followed immediately by paid Google Shopping listings—in this case images of five tents with their prices and links to retailers below the pictures—which are labeled "sponsored." Those listings can include additional product information, such as how many people fit in a particular tent.
Immediately below the row of tent images will be links that enable shoppers to browse by tent type—for instance, by clicking links labeled "backpacking," "ice fishing" or "mountain;" retailers presumably would adjust bids for those products based on seasonality and other factors, including to highlight best sellers, and to maximize margins. Natural search results appear below the Google Shopping module.
At the same time it rolls out the new comparison shopping format, Google also is encouraging merchants to take part in a host of other e-commerce services, like Google Analytics and Google Trusted Stores (see chart on page 20), that will help Google solidify its position as a sales-generating and sales-support tool for retailers.
Its Trusted Stores program, for example, serves as a confidence builder and, if needed, a customer service agent. Merchants participating in Trusted Stores, which is free, display a badge on their e-commerce site 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. If the issue cannot be resolved, Google says it will reimburse a disgruntled consumer the purchase price up to $1,000. Google monitors merchants to make sure they maintain performance standards; Google says it monitors a merchant for at least 28 days before that merchant can display a Trusted Store badge.
No Wild West
For Matthew Hardgrove, marketing director at HomeClick.com, the new Google Shopping will create a better comparison shopping engine on Google. He welcomes the changes, even if he worries about what his employer might have to spend to thrive on Google Shopping.
"Before, it was sort of the Wild West," he says of Google Product Search. It's not that Google Product Search worked poorly—the program "definitely generated" sales for the home-products retailer—but that retailers could list their products there and then all but forget about them. "Google Shopping forces you to be a bit smarter with your marketing dollars."
Hardgrove says he welcomes the chance to be more aggressive and more precise with his marketing on Google. He doesn't want to reveal too much, but says that his Google Shopping bidding strategy might focus more on the weather—HomeClick.com sells such products as fireplaces and outdoor furniture—and targeting particular consumer segments. And he says HomeClick.com also will take part in the Trusted Stores program, and will make sure its customer service is good enough to earn high marks in those listings. "You have figure out what separates you from your competitors," he says.
For other retailers, the key to success on Google Shopping will be the image-rich Product Listing Ads. That holds true for Charlie Hohorst, CEO of CajunGrocer.com, whose site features detailed images of various foods and ingredients, and aims to reflect the colorful culture of southern Louisiana. "Some text can be misleading, but having the ability to view a product image says it all," he says. "We believe the conversion rate will increase. We're excited about Google Shopping."
But neither Hardgrove nor Hohorst would hazard a guess on how much Google Shopping marketing might cost them. And Google is providing little detail. "Costs vary widely, not only by size but by the retailer's vertical, inventory, number of products carried and bids," says Google's Samat. "Our focus is on making sure the return on investment from Google Shopping at any level is high for the retailer."
A March estimate from ChannelAdvisor—roughly two months before the launch of Google Shopping—provides at least a view of the price differences between Google ad products, and their effectiveness. The firm found that the average cost per click for AdWords for its clients was 67 cents, compared with 50 cents for what Google has been calling a Product Listing Ad, a format it rolled out in 2009 that includes richer product information, such as images and prices, than text-based paid search ads. Product Listing Ads now become the vehicle through which retailers advertise on the Google Shopping comparison shopping service.
The average AdWords conversion rate stood at 1.49%, compared with 2.40% for the Product Listing Ads that Google has displayed for the past three years and 2.60% for the free Product Search listings. Average order values stood at $112.24 for AdWords, $105 for Product Listing Ads, and $105 for Product Search. "It's important to note that we do expect the [Product Listing Ad] program to change dramatically with the sun setting on [Google Product Search] as the number of competitors in the auction will increase dramatically," Wingo says.
In terms of how much retailers spend on the new Product Listing Ads, Wingo advises retailers to follow the same rule many retailers apply to paid search: "For every dollar you spend, get $5 in sales."
In promoting the paid comparison shopping service, Google representatives talk often about retailers having more control over their listings because merchants will be able to bid based on product attributes or sales, attracting consumers more likely to buy than in the past. "Over time they will have the opportunity to market special offers such as '30% off all refracting telescopes,'" Samat says by way of example. Presumably, that ad would appear to a stargazer who searched for "refracting telescope."