Google Shopping Moving to Paid Model

One of the most speculated topics in search marketing this year has finally been settled, with Google confirming that its Google Shopping product in the UK will become 100% commercial by the end of Quarter 2 in 2013, or in other words, if you want to feature in Google Shopping results after the end of June 2013, you’ll have to pay for the traffic you receive.

As some of you will know, earlier in 2012, Google moved its USA Shopping product to the fully commercial model, at the same time introducing a wide variety of enhancements and upgrades to the interface designed to improve the user experience and encourage more users to find products through the tool. Additionally, Google suggested that the fully paid-model would improve the quality of product listings being provided by Merchants as they would (to paraphrase) no longer stuff their product feeds with poor descriptions, poor images and out-of-stock products.

Since the roll out Google has published a number of case studies suggesting Merchants have experienced increased click throughs rates on their listings/ads – good for the retailer, good for Google. Now, the fully commercial model is coming to the UK, Germany, France, Japan, Italy, Spain, Netherlands, Brazil, Australia and Switzerland.

Why is this Happening?

The simple interpretation is to explain this away as a means for Google to make more money, which it is, but the reasoning and strategy behind the move is more complex and subtle than that, and is related to the global internet bunfight going on between Google, Amazon and eBay, all of whom are fighting tooth and nail for revenue from product sales that happen online. Allow me to elucidate…

Amazon and eBay are responsible for a phenomenal volume of product sales over the web to a global customer base. As we all know, Amazon has a tremendously efficient stock handling and delivery system for its own sales and also allows other retailers to use their e-commerce platform; eBay by contrast never actually handles any goods, rather it acts as the platform via which goods are sold. Each company takes a share of the sale price of items sold, ranging from 6% to 25% plus a closing fee in the case of Amazon (the top rate being reserved for Kindle Accessories sales) and a wide variety of charges in the case of eBay. Thanks to the enormous volume of traffic it can deliver, Google is also responsible for generating a significant volume of online sales but in the case of sales generated via the currently free Shopping product, it makes nothing from a transaction.

The risk for Google here is two-fold: firstly revenue that could be gained is lost to the retailer of the product, who can pay nothing at all for receiving very high quality traffic from Google. As use of the Shopping product increases, so does the amount of revenue ‘lost’. Secondly, if more internet shoppers elect to start their shopping searches at Amazon or eBay, and cease starting at Google, the search giant’s market share will decrease not only in Shopping, but in Search also, its main product and main revenue generator.

What Precisely is Happening?

A couple of things:

Firstly, the presentation of search results in Google Shopping will change on the 13th February 2013. The space at the top of Google Shopping that currently features AdWords ads will be replaced with a new unit showing ‘Sponsored’ Product listings. The unit will allow users to refine searches by a number of criteria including brand or price and product images will be larger. Google is trialling this new format in the UK now for selected search queries. What isn’t clear is when the full transition to a commercial model will happen – all we know is everything will be moved over by the end of June 2013.

One of the example images Google provided for the USA rollout, showing the altered presentation of products.

Secondly, the way in which your shopping listings are managed will change. Currently, if you wish your products to appear in Google Shopping results you must supply a compliant feed to the Google Merchant Centre; you also have the option of integrating your Google Merchant Centre Account with your Google AdWords Account to show Product Ads and Product Ad Extensions. These adverts can be managed via the AdWords interface in the usual way. With the new model, there will be no automatic entry of products once you have set up a feed – rather you will also have to integrate your Merchant Centre Account with AdWords and set up an active Product Ads campaign. You can actually do this at the moment, although the management tools are somewhat less fine-grained than with the rest of AdWords.

Thirdly, you will have to pay for the traffic you receive from Google Shopping either on a Pay Per Click (PPC) basis or possibly on a Cost Per Acquisition (CPA) basis, which is currently offered in the USA. Some commentators are suggesting that Google is aiming to become a Super Affiliate to major online retailers, which is a logical conclusion to draw.

Google has suggested that incentives will be offered so it’s worth noting that in the USA, retailers who got on board early on received a 10% of spend credit rebate for the rest of 2012. A $100 credit was also offered to certain users, so we may see something similar happening in the UK.

What Do I Need to Do?

If you want to continue to receive traffic from Google Shopping then you are going to have to get used to paying for it, and you’ll need to do a few things as I’ve mentioned above:

  1. Ensure your web site produces and updates a compliant, reliable and accurate feed for the Google Merchant Centre
  2. Have an active, funded AdWords account
  3. Integrate your Merchant Centre Account and your AdWords Account
  4. Set Up a Product Ads campaign from within your Merchant Centre Account
  5. Set a Daily Budget for the Product Ads Campaign
  6. Manage the Campaign as you would any other.

Coming back to the issue of payment – you are going to have to get used to Google taking a cut of your sale value on products and you are going to have to ensure you set your ad bids at a level that makes sense commercially based on your conversion rate, lifetime customer value and profit margin. Alternatively, you may wish to think about how great a percentage of a sale you would be willing to give to Google, which would instruct how you would set up a CPA campaign. Note that Google will take a percentage cut of all product sales a click generates up to 30 Days after the initial click.

Looking at this from Google’s perspective, if online retailers improve the quality of their product feeds, descriptions, images and so on the Google Shopping product will improve. Additionally, the change forces site owners (at least those who wish to remain profitable) to think carefully about how much margin they are willing to give to Google for the sale, and also forces them to think much more carefully about the quality of their web site. With this change, Conversion Rate Optimisation suddenly becomes much more important…as if it wasn’t already!

What Risks Are There for Me?

As with anything relying on integration, data and advertising there are risks for the retailer:

Feed Requirements & Quality – To remain active you will need to ensure your feed is reliable, compliant and is of a very high quality. It’s probably safe to say that Google will start requiring a number of additional data values to be present in your feed, and some of those that are currently optional but recommended will become mandatory. E-commerce platform providers will need to ensure they are supporting their customers by continually responding to Google’s changing requirements. If you fail to maintain your feed, the risk is you will be removed from Google Shopping.

Cost and Bids – A significant risk for anyone using AdWords is over-paying and particularly in the case of retailers selling cheaper items, scrutiny of basket values, profit margin and ad cost will be absolutely imperative. Bids will need to be carefully managed to avoid the risk of acquiring unprofitable or even loss-making sales.

Conversion Rate – As I’ve noted above, retailers will need to pay much closer attention to how well their site converts visitors into customers as improving and optimising their conversion rate will aid greatly in being able to participate in Google Shopping on a profitable basis.

AdWords – If you aren’t currently using AdWords then you’re going to have to, and if you don’t know anything about it or don’t feel comfortable managing it on your own, you’ll have to find (and pay) someone like us who does.

How We Can Help?

We’re already working with a couple of retailers to plan their transition to the commercial model and we’d be delighted to help you do so too. Having had considerable experience in setting up merchant centre feeds, we’re well placed to assist with everything you need to do to be listed. Specifically, we can help with:

  • Auditing your current Merchant Centre Activity and Traffic, and the resulting sales to assess performance
  • Auditing the content and quality of your feed and advising you on what you need to do to improve it
  • Setting up Google Merchant Centre Accounts, integrating feeds, automating feed updates and ensuring complete compliance with Google’s requirements
  • Setting up, managing and optimising Google AdWords Accounts including product ads
  • Simply giving you a helping hand through the whole process

If you would like to discuss how we can help, or have any questions please don’t hesitate to contact us at hello@mackerelmedia.co.uk or on 0845 224 7428.