Google Shopping is Becoming a Commercial Site: Impacts to Consumers?

Screen capture taken from http://www.google.com/ads/shopping/

Screen capture taken from http://www.google.com/ads/shopping/

Google’s made it official:  Google Product Search is becoming “Google Shopping.”

And, it’s becoming a fully “commercial site.” Right now, Google Shopping states that it “is compensated by some of these merchants.”

But soon, all Google Shopping results, will only list products for which merchants pay a fee to list. And, the fee is going to be “Bid-based.”

Lots of questions about what this will mean to merchants and, ultimately to consumers.

Key unknowns:

  • Will fees change the merchant pool (type and size of sellers) submitting data to Google Shopping?
  • What will the PPC fees per product listing be?
  • How will the “Bid PPC” factor (explained below) determine how products are presented to consumers.
  • More advertising seems to be anticipated, as all product shopping contributors are being given credits toward an AdWords campaign: will the demand mean higher ad and / or listing costs?

In a notice to merchants back in May, Google said one reason for the switch is the desire to “improve the quality” of information provided by merchants.

We don’t think Google needs more money, so we’ll take their word.  (According to the most recent figures for the 2011 fiscal year, Google generated over $37 billion in revenue from PPC advertising.)  Still, we’re not crazy about the new model and other streamlining of other Google products, which in part influenced Google’s somewhat controversial new “Privacy Policy” earlier this spring and last modified on July 27, 2012.

We urge anyone to read the Google Privacy Policy carefully and see how much information Google tracks on you each time you use any of their services.  We, for one, are in the processing of moving our Gmail accounts to other servers because Google tracks who you email and how often, which we frankly don’t think is any of their business. And, it is no longer possible to even do a simple Google search unless your cookies are turned on.  We have several browsers, and half use cookies, half do not.  As of a couple of weeks ago, we could not longer do Google searches in the browsers that do not use cookies.)

In the past, we’ve written posts and articles about shopping carefully when evaluating product prices at comparison websites, including some of the ridiculous games some merchants play, and making sure you know who is selling you what.

Differences Between Paid and Free Price Comparison Sites

All of these logos were copied from the respective websites

We’ve always said that there are two basic types of product comparison shopping sites:

Free shopping comparison sites, such as the soon-to-be phased out Google Product Search, TheFind.com, and Bing.com‘s shopping results.  These sites traditionally have not charged merchants fees for product listings.

Paid shopping comparison sites, such as PriceGrabber.com or Shopzilla.com charge merchants a fee every time someone clicks on an item in their listings (called a Pay per Click or PPC fee).  Soon, Google Product Search will become Google Shopping and they also will charge merchants fees for listings.

Because so much of our sales are related to product listings (including those on Google.com), we’re hoping for the best and do plan to try the new paid Google Shopping.  Even so,many small, or even mid-size, retailers don’t use “pay-per-click” sites because “window shoppers” and inquisitive competitors can quickly ring up large bills with out generating any sales.

Equally important: consumers get a wider selection of products when a free site is used.

Keep in mind that you may usually not know if a site charges its merchants for product listings unless the site specifies this, and not all do. We were happy, for example, to see that the new Google Shopping does reference that listings are paid for by merchants.

This is what we do know for sure, taken straight from Google’s May 31, 2012 announcement:

First, we are starting to transition Google Product Search in the U.S. to a purely commercial model built on Product Listing Ads. This new product discovery experience will be called Google Shopping and the transition will be complete this fall…

“We believe that having a commercial relationship with merchants will encourage them to keep their product information fresh and up to date. Higher quality data—whether it’s accurate prices, the latest offers or product availability—should mean better shopping results for users, which in turn should create higher quality traffic for merchants…

Ranking in Google Shopping, when the full transition is complete this fall, will be based on a combination of relevance and bid price–just like Product Listing Ads today. This will give merchants greater control over where their products appear on Google Shopping.” (View full  May 31, 2012 announcement.)

Well, we know there’s a lot of incorrect data provided and shenanigans played by merchants within the current Google Product Listings today. We just aren’t sure this is the solution, or Google’s sole motive.

What small merchants are concerned about is not only how much this added cost on a previously free service will impact their ability to full participate in the new Google Shopping.  Many are also concerned that Google Shopping, like Google AdWords, will have two classes of merchants:

  • Those who spend $5,000 a more on Google ads each month; and
  • Those who do not.

How Will Google Product Search Paid Listings Impact Consumers

That really is the $64,000 dollar question. We’ve read scores of articles and papers about the new Google Shopping and attended numerous seminars on the subject.

Until we more directly from Google.com, we’ll stick with what we know for sure.

Screen Capture of New Google Shopping, 8/02/12

Screen Capture of Google http://www.google.com/prdhp (Google Product Search / Google Shopping 8/02/2012)

We don’t, for example, now what the the new Product Search Results will look like to the consumer. Some questions include:

  • How exactly the new Google Product Search will look and act?
  • Will smaller merchants pay for product listings that used to be free, especially when PPC costs can run up quickly?
  • Will the best values actually be the ones displayed most prominently?
  • Will consumers feel confident the best values are always presented to them without bias?

We know that “Ranking in Google Shopping will be based on a combination of relevance and bid price.” So, here’s what we think and some other questions we have.

Google: “Relevance” and “Bid Price” Are “Key”

A merchant will submit two sets of information to Google related to product listings. For “relevance,” product feeds will include:

  • Product info so that the search engine can compare the same products.  This includes brand, product number, product name, UPC code, etc.
  • Unique information on product’s price, shipping costs, taxes and if a store wishes, may link to Store Policies, Store Return Policies, Accepted Payment Methods, etc.

The second part of the mix will be Bid Price. 

How exactly Bid Prices will work in practice is uncertain: Will results be filtered by the bid merchants pay? Will the weight of a bid upon product listings be noticeable to customers?

Since Google referenced Bid Pricing, it’s fair to review how Bid Pricing works when paying for a Google AdWords ad campaign.

Advertisers select prices or “bids” that determine where the ad will display.  Merchants decide whether the ad will be a banner ad at the top of the page, or located along the side of the search results.

Advertisers can limit those who see the ads by geographic and demographic segments, types of computers used (for example desktop, laptop, smart phone, tablet device), and the hour of day and days of week when the ad will show up.

Ads show up on relevant Google shopping and non-shopping searches, but it usually costs more to place ads on a product search page.

Then comes the tricky part. Advertisers are shown a range of prices based on what recent advertisers have been willing to pay for similar ads and similar “key words.”  An advertiser then selects the highest amount they are willing to pay each time someone clicks on their advertisement and visits their website.

The amount of one’s bid directly determines where ads appear.  Highest bid ads show prominently on Page One of a Google search.  Ads with lower bids show up on pages 2, 3 or 4 of any given search result and those with rock-bottom bids will show up in locations that most people never see.

Because a fee is charged only when someone “clicks” on the ad and visits the advertised site, thus the term “Pay-Per-Click” or PPC fees.

  • The good news: you only pay when your ad catches someone’s eye.
  • The bad news: PPC ads can quickly add up to substantial amounts of money.

Obviously, many merchants are worried about how much the new Google Shopping will cost. It’s always been free! For consumers: could it mean that the best value will not always be the one at the top of the list?

When we run Google Ads, we usually bid on the key words “solar lighting” and “solar lamps.”  Bids for good, but not the best, placements run $2.25 to $2.75 “per click.”  Ads can be positioned to show for certain geographic and demographic criteria, hours of the day, and days of the week.  We received good ad placement and most of visitors from the ads spent considerable time on the site, and about 3 to 5 percent (about average) made purchases.

What We Think Merchants Will Do

We think that a lot of small, non-niche retailers will start leaving Google Product Search rather quickly, limiting the “organic” choices available for the consumer.  In the mid-term, large stores, mega-stores and specialty stores will prevail and may do very well with the new Google Shopping model.

Long-term, except that only the most exotic “niches,” mega-stores and large specialty stores will be able to pay for listings.

And for those who stay in Google Product Search or any paid comparison site, inevitably the PPC charges become overhead costs reflected in product prices.

AdWords is best leveraged by companies spend $5,000 or more per month on Google ads.  Who will be able to best leverage paid Product Listings?

Don’t Put Your Eggs or Search Results In One Basket

Don’t Rely On One Source for Any Thing!

We hope that in a couple of months we come back saying we love the new Google Product Shopping.

In the meantime, here are some things that consumers should understand to make smart decisions when looking at product listings.  We recommend using free product search engines like Bing.com and to consider looking at different product comparison sites to view what is available from the widest pool of merchants.

Most importantly:

Whatever comparison site you use, make sure that the products you are looking are not influenced by how much the merchant paid to show it to you.

We’re not saying not to use Google Shopping; we’ll still be there, for a while anyway. But, we do recommend adding product search sites such as  TheFind.com and www.Bing.com.

In addition to looking at the product listings, click on different products to make sure you really are getting the best value, including looking at the following before you click on the CheckOut Cart:

  • Is “Free Shipping” really free?
  • How accurate are “Estimated Shipping Costs?”
  • What are the competition’s store, shipping and return policies?

Copyright 2012, SolarLightingSmart.com, SolarFlairLighting.com, AM McElroy
All Rights Reserved

3 thoughts on “Google Shopping is Becoming a Commercial Site: Impacts to Consumers?

  1. Pingback: This Season Compare Prices Carefully, Particularly Shipping Costs | Solar Lighting Smart

  2. Pingback: This Season Compare Prices Carefully, Particularly Shipping Costs | SolarLightingSmart.com

  3. Pingback: MAP Pricing Means That Steal of A Deal May Not be Delivered | SolarLightingSmart.com

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s