Every once and a while, you see a webinar that makes you think differently about things.
For a while now, comparison engine growth has stagnated, and in some cases reversed, while the rest of the online retail industry has steadily grown at a rate around 15% per year. This webinar addresses what is happening with shopping engines and whether the customer segment they represent is worth going after in light of other resources fighting for budget (the answer is yes, by the way).
If you have been working with CSEs for a while, or just looking to understand their evolution better, I suggest taking a few minutes and check out “Are CSEs Dead? The Evolution of Shopping Comparison Engines”
This is how years of waiting lead to a few months of scrambling.
A widely held belief among CSE and e-commerce professionals for years has been that Google would eventually convert their Google Product Search service to a paid listing service. I had believed, incorrectly, that Google would focus on their existing Product Listing Ads program and keep Google Product Search, just like there are paid and natural search results now for web search. However, Google took the step of completely converting over Google Product Search to a paid service funneled through Google Adwords, formerly known as Google Product Listing Ads. The new service will be branded Google Shopping, which seems the natural choice ever since ‘Froogle’ was recinded. Danny Sullivan correctly noted this flip from free to paid is the first time Google has rolled back a free service into a paid model. So on both levels, for CSE and Google, this is a defining moment.
From the Google perspective, the move is seen as a way to better refine search results. One of the issues encountered by Google under the free model, is that there were many low quality sellers and listings which muddled the search results and provided a poor user experience. By implementing a paid model, Google then removes a lot of the clutter by limiting listings to merchants will invest in their marketing. With investment then comes control, and that holds for the investor too. The issue of control is what has continued to push product listings into Google Adwords. Once product ads take advantage of the Adwords infrasctructure, then product listings have the most advanced online marketing tools available, including many features foreign to CSEs such negative keyword lists, day-parting, and ad group control. The ripple effect from this change not only changes the way CSE marketers will work, but causes a ripple effect througout the CSE industry. This could signal a collapse for free shopping engines and strong downward pressure on 2nd and 3rd tier comparison engines as budget moves away to Google.
Consumer Facing Impact
From a consumer point of view, the new Google Shopping experience will condense product listings and limit a consumer’s view. In recent times, some type of product image related ad has shown-up all over the Google SERP. By taking this step, Google begins to consolidate the ads into specific sections, with the most important limitation being that the Google Product Search results area will now feature a tighter, 5 listing format avaialable above the fold. Individual listings will still appear in the top and right-hand portions of the page. The product listings will attempt to drive traffic directly to a merchant site typically, but a consumer will still be able to enter a Google Shopping area (also available via ‘Shopping’ link), where all search results are product listings. Over time, Google plans to build greater search functionality into the Google Shopping area, such as better refinded left-hand navigation choices. This sounds like the same approach as Amazon, where there will be product group specific refinement options, likely coming from more advanced product feed processing.
Merging Platforms, Changing Systems
To make all this happen, Google has an ambitious project to merge 2 existing systems to create Google Shopping. Previously the Google Product Search system was developed from the Froogle/GoogleBase lineage, but then a seperate system derived from the GAN (Google Affiliate Network) platform is used for Product Listing Ads. These 2 systems had led to seperate requirements for each service, so for example, a product could be ineligble for Product Search but live on Listing Ads. The unification of the two systems will lead to a single set of requirements. Currently it appears the current product URL for Product Search will be depricated, and the ‘adwords_redirect’ field, aka Adwords Redirect link, will be used for all future traffic. Likely additional data points will continue to roll out, both in new product data points but also Google system specific points used for not only AdWords, but also emerging offerings like Google Catalog and Google’s retargeting program.
Any new change creates opportunity just by disruption, so smart merchants will see the opportunity to exploit what should be a massive push by Google during the Holiday Season to route consumer traffic and sales to merchants. The timing of the Fall changeover will lead to chaos, but will also will reward the merchants who become adept and aggressively test the evolving Google infrastructure. Initially during the change, the combined Product Search and Listing Ads conversions will likely decline, and competition in the Listings Ads (aka Google Shopping) will spike. However, the new focus on product traffic will provide a lot of opportunity to make up for the shortfall. The most significant change is that Google will need to be treated more like a normal paid channel, with a careful eye on return when calculating ad spend costs.
The next significant division occurs across company lines, where small business should worry and big business should smile. That type of statement has been too politicized, so to be clear here, Google will focus on what they see as the top businesses in terms of quality to the consumer. So large brands will tpyically benefit here, where Google will continue to move to list the top ~5 merchants on a product result, and overall will lean more toward a large brand based on popularity/history components. The consolidated space means that marketers representing large retailers or retailers with a strong brand in their product space should see significant opportunity. The Google alrorithm will look at product listing relevancy before considering bids, so it’s important to understand that keyword-search-to-product-match is still heavily dependant on the product information being submitted, so optimization is not a strictly monetary one. Businesses worried about rising costs, should carefully consider elements outside of bidding.
One possible opportunity for the small business space revolves around the auction format which makes up the Adwords infrastructure. Currently there are minimum bids in place, but I’m hopeful that Google will one day experiment with an open bid system. This way small merchants could bid $.01 for niche traffic, and still see some good exposure without a heavy financial burden. That’s looking ahead, but curerntly is still one important optiono to help tight margins. Retailers shouldn’t forget about Google’s CPA option. Google Shopping will continue to support both CPC and CPA billing methods. An important aspect of the CPA option, is that Google systems are able to take sales/revenue into account, and that’s important because the traditional CPC option is built to drive traffic as the end conversion point, or goal. Under the CPC format, Google will reward merchants with placements and clicks, but it will still be up to the merchant to manage and define how much to pay and when a click makes business sense. For CPA, Google tracks sales through site installed tracking code, then the likelihood to convert and anticipated order amount are factored in, and thus lead to better refined traffic for purchasing. Aside from intelligent use of promotional messaging and ad grouping, the CPA/CPC option is one of the most significant decisions when structuring Google Shopping campaigns.
Overall, this change should be a significant impact to every merchant with a significant online presence. It’s been a while since I’ve seen an advanced merchant not using Google Product Search, so I would expect the same to hold true for Google Shopping by the end of the year. For small merchants who are doing any type of paid online advertising, budget should be alocated and resources devoted to this change. For large merchants, if the CSE and SEM teams have not been working together yet, the time is at hand. Good management technique will now require both skill sets for Google Shopping, and the pressure will be on for other CSE’s to follow suit.
Google’s Official Announcement for Google Shopping: http://googlecommerce.blogspot.com/2012/05/building-better-shopping-experience.html#!/2012/05/building-better-shopping-experience.html
Danny Sullivan’s Take from SearchEngineLand: http://searchengineland.com/google-product-search-to-become-google-shopping-use-pay-to-play-model-122959
Rimm-Kaufmann’s Take from the RKG Blog: http://www.rimmkaufman.com/blog/google-shopping-no-longer-free/31052012/
I’ve posted before about how legal related issues and cases are beginning to catch up and carve out the landscape for online business. The public explosion of the SOPA debate served notice that the online community can galvanize, apparently at a moment’s notice. To help keep track of recent developments, I’ve put together a quick summary of what happened in the first half of February.
However, Congress has batted this around, concerned by things such as violating HIPPA policy, which is a good question, but ultimately not a legitimate concern. The Electronic Privacy Information Center, while normally a group I advocate listening to, is suing Google saying this violates an aggreement which Google made with the FTC while developing Google Buzz. This case does fall into EPIC’s main focus, however the opt out portion is pretty clearly stated by Google, and in the case of advertising, is pretty safe compared to less scrupulous means of tracking.
Europe’s stance on internet related actions always serves as an interesting contrast to the American approach. One such topic should be monitored as European Union is enforcing a new law in May 2012, which will require all users of a website to consent to have their information tracked, and a cookie to be placed on their computer. So, imagine clicking on a foreign comparison engine, being directed to a retail site, and then having to opt-in to allow your activity to be tracked. It’s safe to say many consumers will decline, which raises all sorts of tracking and attribution related issues for businesses. To think, May is right around the corner.
Occasionally France is good for a laugh, and that’s true with their recent decision to penalize Google for offering Google Maps for free. France is famous (or notorious depending on your perspective), for protecting their national interests, including those of competing French mapping companies. To be fair, this same treatment helped create the French fashion industry, by helping to maintain the prestige of key brands. So, this seems to be a case where Google must simply pay up to do business in France ($660K in this case).
On the other side of the coin, my distant kin in the Czech Republic have allowed Google Street View to continue their work. Some key points have been worked out including allowing citizens to petition for the removal of personal information. So, at least Google has some good news across the pond.
Taxes, Taxes, and Taxes
Did someone say online sales taxes were coming closer? Virginia recent voted to close a loop hole which allowed Amazon to avoid collecting sales tax in the state, so momentum builds for some type of solution. In New Jersey, Amazon is working with legislators for a 22 month amnesty before collecting sales taxes at the Garden State, allowing for warehouses and jobs to be created in the state. This holds with Amazon’s strategy of conceding the payment of sales tax around 2014. Whether this is because Amazon expects to have physical stores by then, or just expects the sales tax issue to be handled federally, or both, is still unclear.
RIP: SOPA and PIPA
I wouldn’t be doing my part without lending some additional thought to SOPA and PIPA. Recently the Recording Industry Association of America (RRIA) President Cary Sherman, criticized Google and Wikipedia for becoming politically active instead of taking a neutral stance in the matter, comparing Google to a television station’s position of giving neutral coverage. Of course this is a pretty narrow point of view of the issue in criticizing Google for defending a key principle of the internet, but to be fair, SOPA and PIPA were founded on fundamentally good intentions of helping to curb online piracy of content. Noting that the music industry’s company VEVO showed pirated content at their own event, it’s pretty obvious that there is a fine line in sharing content, and intentionally stealing content for personal gain. While I would love to embrace Chris Anderson’s view that we are moving toward free information, there simply must be mechanisms in place to make sure content is controlled how it’s creator intends. It’s more and more obvious that copyright law is outdated overall, including how to enforce key provisions of unique content. In the new world of digital communication, a new way of operating is needed. The most important question, is how that should happen.
So, it looks like Google has finally found a way to monetize Google Product Search.
It’s been discussed for years, ever since Froogle was in beta, how Google would eventually get money out of their free product listings. Retailers have been seeing shifts in traffic for several months now, where clicks are moving away from Google Product Search and over to Google Product Listing Ads.
The exact amount of the shift will depend on the product segment and retailers in question, but the trend is undeniable and feeds into Google’s strategy to more aggressively pull in revenue from their programs. There are still likely to be many changes upcoming for for Google, including potentially new programs which are based on the product data which is sent to Google Product Search. However for now, retailers should aggressively work to expand their Product Listing Ad programs through:
- Aggressive bidding
- Campaign and ad group structure
- Negative keyword lists
- Promotion text
- More advanced techniques such as day parting which is now available
After all, if Google is aggressively pushing the program, that can be a powerful current to ride.
SOPA, or the Stop Online Privacy Act, is another internet focused measure being circulated as federal legislation around internet use continues to heat up. My estimate is that it takes federal government about 10-15 years to catch up with current innovations overall so we are just now seeing a coming wave of laws which will take aim at policing technology and internet use. That kind of latency is not unheard of, and really whenever there is a technological revolution, there will eventually be laws enacted to follow up on those changes. So whether we are talking about driving laws to catch up with the advent of the automobile and changeover from pedestrian/animal based transportation, or labor laws rising up after factories and industrial lines became wide spread, now we are entering a period where new measures are being penned to catch up with the rise of online business.
SOPA is now being oppossed by industry leaders Google, Facebook, Amazon, and Twitter. Essentially SOPA would allow the federal government to block sites from a U.S. audience which have been shown to be pirating content (estimated to cost $775B in lost revenue annually). There are many problems with this measure as Inc. points out, including a heavy burden on small business, questions for companies with user supplied content, and problems with existing security protocol. Additionally, having such sweeping powers to block sites creates all of kinds of questions about who is doing the blocking and how sites are properly judged.
The good news is that is looks like the issue has gotten enough attention, this measure will not pass in it’s current form. However, it brings to light an important point about why companies like Yahoo, Google, Amazon, and others have found common ground in groups like NetCoalition. The internet is new enough, that the public and government do not have a firm grasp on technical and structural issues to form rules which will bring more positive benefit than negative. It is the responsibility of those engaged in online business to be aware and take part in the formation of rules and regulations which help the public, but do not infringe on the openness which has allowed online business to expand at an exponential rate.