Google’s recent announcement relating to the creation of a new standalone Shopping service, has significant ramifications for advertisers whom utilise the Google Shopping advertising product.
As a result of a complaint bought forward by some of Google’s competitors in the price comparison space, the EU ruled in June that Google pay a 2.4bn Euros fine, and withdraw from ‘monopolistic’ practices relating to how it serves ads and monetises it’s search engine.
In other words, the EU isn't happy that Google’s Shopping ad listings effectively ‘own’ the space above text adverts on it’s search engine results page. The listings are effectively visual units that advertise individual products against the search queries that users type into the search box on Google.
Regulators ordered the search giant to make these changes by September 28th, or face a fine of up to 5% of daily revenue if it fails to comply.
In response, Google announced that within the EU, it will auction off the space usually reserved for it’s Shopping ads to rival sites such as Kelkoo and PriceGrabber, in addition to advertisers whom currently bid for these slots via it’s AdWords platform.
Why is it a big deal?
Since becoming a paid advertising channel in 2012, Google Shopping ads have transformed the way that retailers advertise their inventory to search engine users. Previously, text ads were the only way that advertisers could advertise their products; however, the much more visual Shopping ads soon took precedence due to the ability to communicate factors like price and product imagery before user’s even clicked through to a landing page. As such, these ads became increasingly favoured by advertisers and consumers alike - advertisers preferred them to text ads due to superior traffic conversion rates, and consumers due to their visual appeal and relevancy to product-specific search queries.
Indeed, you only have to look at advertiser spend trends in the US to get a gauge of just how popular these ads have become. According to AdGooroo, top retailers like Walmart put 71% of search ad spend on Shopping ads vs. text ads; 79% vs. 21% for Best Buy, and 85% vs. 15% for Staples.
What does this mean for retailers?
In the short-term, advertisers can expect metrics like Impressions, Impression Share, CTR and especially Cost Per Click to be negatively affected, as Google opens up the auction to competing product comparison sites. Indeed, there are already signs of this taking shape, with Shopping ads now carrying ‘by Google’ messaging underneath each ad unit to denote ads from its own platform:
In the medium-term, it’s likely that most performance metrics will be affected, including Conversion Rates, due to more ‘advertisers’ effectively competing for the same ad space. Retailers may even also need to look to other product comparison channels in order to maintain their reach within Google itself.
Finally, the longer term view may be that this ruling has significant ramifications for Search overall, beyond the EU, and beyond just Google. For example, if other bodies take note and decide to enforce similar measures, Google search market share for product related search queries may be impacted on a global scale. Moreover, Google may take pre-emptive measures and decide on its own to roll out substantial changes universally to its Shopping product, in order to avoid future issues now that the precedent has been set.
Should other advertising platforms be worried by this ruling, and Google’s subsequent re-positioning? Potentially, yes.
What’s to stop the EU ruling that Amazon’s sponsored products feature, which promotes seller’s products on Amazon, won’t also be seen as a monopolistic practice? We could see that some of the world’s most popular eCommerce platforms having to give up valuable screen real estate to competitors in order to satisfy regulators and other observing parties.
Whatever happens, this announcement from Google could fundamentally change how retailers approach their search advertising activity, particularly in the run-up to Christmas.
If you want to learn more about Google Shopping, how it works, and best practices to extract maximum ROI, then why not enrol on Jellyfish Training’s innovative classroom-based Google Shopping course, which runs once a month from Jellyfish’s training facility in the Shard, London.