To Pay, or not to Pay, that is the Question… Google Shopping

Google Shopping or Google Products has been around quite a while, and for some of our ecommerce customers has been consistently the number 4 or 5 revenue channel, (Typically after organic search, paid search, direct and email marketing) thereby making it much more ostensibly productive than social media (OK, moot point about how you track SM-originating revenue, but if you are cold-blooded about it, you would prioritise Google Shopping way above Social Media for ROI).

Google Shopping – Awareness
We are always amazed by the lack of awareness of this channel even among some online retailers, and although setting up feeds can be a hassle (especially because Google has got ever more onerous about data format and quality) many ecommerce platforms facilitate the automated upload of feeds, thus making the ROI on this channel outstanding.  However, that could be all about to change.
One of the confusing aspects of Google Shopping has been what’s it’s actually called. For quite a while Google (at least for retailers) referred to it as ‘Google Base’ (what that?).  It appears that Google Product Search (US Name) will be re-named as Google Shopping in the UK and in the US, and will present the biggest change in that it will become a pay per click model.
The name confusion and Google’s half-hearted efforts to market their products also seems to  mean that consumer awareness of this search service is also quite low based on anecdotal evidence.
Currently, a retailer can display their products free of charge in Google Shopping by submitting a data feed via the Google Merchant Centre, this allows products to be shown in the search results when someone searches for a particular product as the example below shows:

shopping.png


The Ads shown under the paid ads are paid ‘extensions’ within the Google AdWords model and not to be confused with the free listings with organic search.  Clicking on the ‘Shopping results. . .’ link takes you through to a dedicated page which allows consumers to compare product prices from different retailers.

Moving Google Shopping into the AdWords structure
What Google are intending to do (Currently in test in the US, and 2013 in UK) is charge customers to show their products within the search page, as with product extensions – on a pay per click basis.   As we have customers in the US whom this is already impacting, we feel that we have been able to get a head start on this for our UK ecommerce customers.
We knew paid-for Google product was coming but still find it strange how it happened.  We had noticed a decline in what Google Analytics was attributing to Google Shopping revenue.  After some investigation we determined that Google had already started charging for what had previously been free clicks. The costs for these clicks had by a miraculous sleight of hand started appearing in the AdWords account, and Google was attributing associated sales to AdWords.

So why have Google done this?  In our opinion there are two reasons.

1) The most obvious reason is that Google have found a way to monetise Google Shopping - even if it’s taken them a long time. 

2) The second reason is that if retailers have to start paying for their products to be shown, then they should make more effort to get their product descriptions accurate and up to date, the idea being that this in turn will make the user experience a much more useful experience.

What does this mean for advertisers?
Firstly, they will need to understand the new relationship between the feed (which they submit via the Merchant Centre) and Google AdWords.  We had been wondering how Google was going to monetise Google Shopping.  And this is how they are going to do it.  If you do not have an AdWords account it doesn’t look like you are going to appear in Google Shopping going forward.  Google has added a ‘Product Listings Ads’ campaign into existing AdWords accounts.  If you are then submitting a shopping feed and IF the two are linked, then your products will appear in Google Shopping.

ROI – will it pay for retailers?
Advertisers will have to reassess their strategy in this arena and put more time and effort to see a return on their investment.  For example, an advertiser may have been getting on average 25 transactions a month through Google shopping with an expected return of £1,000 in gross profit.  Previously this was great as it cost nothing to get these sales (and the ROI was thus essentially infinite).  With the paid model, it may cost the advertiser say £500-£1,000 to achieve this level of transactions thus rendering the ROI very borderline  or worse.  If so, is it now worth submitting the feed?  Would the investment in clicks here be better employed elsewhere?  Will it cannibalise my paid search transactions at a lower CPC? If I do get sales on certain items that I now have to pay for but not on others, shall I drop the non-performing products from my feed? (And in this case there is an interesting knock-on effect for consumer choice.) These are the type of questions you have to ask yourself.

Google Shopping – what to do
From what we can see, our approach to the commercialisation of Google Shopping will be to work as follows for our clients:

1.    Ensure that our feeds are compliant, high quality, and include the more ‘tricky’ data like shipping costs.
2.    Ensure that the relevant Google Merchant and Google AdWords accounts are linked
3.    Re-organise the associated Analytics accounts so that we can track Google Shopping sales and ROI properly
4.    Assess ongoing ROI and optimise or drop products and feeds that don’t pay

Revised Google Shopping  may not be arriving in the UK until 2013, but the sooner you get prepared for this change, the better.  

Will it work for anyone?
As a postscript, we can understand that Google would want to monetise a service that would obviously cost them something to run.  But we wonder if they will end up shooting themselves in the foot.

Firstly, retailers will want to optimise their feeds – they will have to know they are paying for clicks.  This will mean stopping paid clicks that never result in sales.  And the only way we can think that we can do that is to remove those products from the feed.  If we guess that Pareto’s law must apply to Google Shopping, then at least 80% of products that feature there won’t sell for a reasonable click cost.  The effect would be that retailers remove 80% of their products from the feed and Hey Presto! - Suddenly there are 80% fewer products on Google Shopping.  And it will get worse.  We suspect that a very large proportion of the products on Google Shopping are put there by small online players and eBayers.  Google Shopping is a great ‘free’ way of getting them exposure – especially if they sell on price not on their brand.  Most probably don’t use Google AdWords, as their slender margins preclude it.  We think they will be out of Google Shopping like a flash.  So that’s lose-lose-lose then for Google, retailers and the consumer.

Comments:

Comments
Abraham
That's a mold-berkaer. Great thinking!
20/10/2012 09:17:26

Chris
Hi Paul, Thanks for this - thank goodness at least one of our readers can spell :-) We've 'Pareto'd' it.
16/10/2012 10:18:44

Paul temple
Fascinating stuff!
I think we should talk (Dean/Chris) at some stage as we wish to move into internet retailing.
By the way, it's Pareto...
14/09/2012 18:52:54

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