Last year Google was rolling out their private beta of Product Listing Ads, and this year most people are eagerly anticipating the public launch. The program has been taken out of Google Affiliate Network and is being merged into the Google AdWords program. The platform switch should allow much greater control and more intelligent penetration into consumer’s retail based searches. The control will come from better management capability for bidding around both CPC and CPA based options. The search penetration is simply growing steadily.

Google Product Ad Listings: CPA vs. CPC

I was afraid CPA was going away, I admit it. CPA has always been a bit of a mythical animal, rarely spotted in the wild. So many companies have tried to do CPA based retail programs, and to date only Amazon has made it work well. With the transition of PLA to the AdWords platform, there were rumors that the CPA program would give in to CPC only. CPC is good because it potentially allows much cheaper conversions if the product actually sells. Spending $.10 on a click to sell a $100 item is a pretty good investment. However with CPC the security blanket is removed, because a retailer could easily get an avalanche of clicks with no sale at all. This is one area where Google shines because they offer a real option of using CPA or CPC, and variable rates can be set up within the same product catalog. Kudos to Google for striking a balance between merchants who prefer one method over the other.

Product Listing Ads vs. Product Extensions

As a quick note, Google is offering and pushing both programs together, however they really aren’t in the same ballpark. One program gives a retailer prime real estate on the upper right corner of a search result page, and the other gives retails a small ‘+’ icon on the AdWords paid listing which very few people click. One merchant I’ve spoken to said that about .003% of people clicked on the icon needed to expand the Product Extension Ad and clicked on a product. Not exactly great penetration.

Expanding Product Listing Ads

So in budgeting for PLA, things can be difficult to judge. The reason is that PLA is still expanding and being tested constantly. I’ve worked to put together some information to show comparisons of different searches across time, however because Google is constantly testing ads, it’s very difficult to judge what kind of reach the ads have. For example, try searching for “Huffy Bicycle” a few times. Sometimes you get a PLA section, sometimes you don’t. Additionally, since PLA is driven by product selection, the ads will only have as much exposure as the current product selection allows. For example, if no merchant selling widgets is enrolled in PLA, then no ads will show for a widget search. Most ads you find now center around Walmart, Target, Meijer, Kohls, and other large brands.

However, as more merchants are getting on board through the beta program, more ads are surfacing. Google seems to stay away from generic words, so ‘teddy bear’ and ‘toys’ don’t pull any PLA results. A search for ‘bicycle’ currently has one result from Kmart, but then “girls bmx bicycle” gets the full PLA treatment including Product Search based one-box listings.

It seems the Toys category in general is getting much more exposure in time for the holidays. I remember doing some searches about 3 months ago and not finding much. So for budgeting, the best way to see what traffic and sales will be like, is to just launch the program.

Matched Listings

One evolution happening is that more and more are ads are now showing matched listings in the results. Below is a screen shot attached for a search on “red wagon”. In both PLA results the listings are matched between 3 separate merchants on the same item. The behavior of these listings will be very similar to the Buy Box on Amazon. For comparison sake, let’s call this the Buy Link.

In this example, RidingStores.com and Cymax have the primary buy link where most consumers will click. The title and image for the product both go to the primary link to the winning merchant’s site. The competing offers from Kmart, Target, and Diapers.com can only be accessed if the merchant name is clicked on. This creates relatively small coverage where only a small percentage of the ad will lead to the non-winning offers. To make it worse, merchants with a  long store name are essentially penalized. In this example, Home-Improvement-Superstore.com has such a long name, than Google can’t fit the name in the ad. You can only see “Home…” as the merchant name, which could be almost anyone from a consumer’s perspective. As the ads develop, merchants will need to be increasingly competitive to win the primary buy link, and also hope their names are not too long to be identified.

Overall, Product Listing Ads continue to evolve in new directions and will likely grow to include more frequent exposure. The ads will likely develop to include more information including components such as product reviews. Since the market will only grow, merchants not already using this platform should work to get on the band wagon as quickly as possible.

The big buzz centered around Like.com’s impressive image reading technology. Like has pioneered this effort for years, and with their last round of $32M in funding, they were able to build impressive amounts of traffic. To build their business case outside of raw traffic and image search technology, Like also came up with creative strategies around CPC and modified ROI incentivized programs. It seemed like Like was the most likely candidate to break through to the upper esceletion of shopping engines until the Google purchase. The main question is, what happens next?

The obvious answer is that Google covets the image technology that Like developed and is looking to fold this into their technological arsenal. Based on Google’s ambitions at differentiation from Bing, they will likely seek to roll this image technology out to several platforms including perhaps Google Maps for additional location identification, beefed up image search technology for image only results, and possibly even using this as an additional piece of their natural algorithms to better rank pages. From a retailing stand point, it seems like a simple step to bring the image search feature to Google Product Search. Google has put enormous of energy into making Product Search into a premier retail destination and the image functionality could be an important differentiator in the same ways Like was using. The only part is, that the image search feature helped Like, but it wasn’t a game breaker.

So what of Like.com?

I’ve seen mixed signals, and it may be safe to say that no one knows for sure. If this were Vegas, 4 to 1 odds Like.com goes away and is absorbed into Google. When your homepage calls out that you have been acquired, and you scale back your traffic buying, the Magic 8 Ball says that signs to point Like going away. Of course, the 8 ball has been wrong before…

My initial reaction was disappointment, because I had grown fond of Cashback’s Shopping program rolling in increasingly higher sales while still maintaining easy to manage ROI, based on Microsoft’s brilliant adjustable rate commission system. The hope was, that the program would continue to improve and grow in size as there should have been a lot of updates in the program’s maturation including more responsive content processing, better results pages, and the eventual move to Microsoft skimming some of the commission off the top. However, that never happened, and like most people I am looking for ways to replace performance after July 30th, when the shopping program will move to generating free natural traffic which will likely pull down sales significantly.

Now looking back after a few weeks to take it all in, there are several big takeaways from this announcement.

1) Making a commission based program work, is very very difficult.

Amazon makes it look easy, but really, how easy is it? Google has yet to get a successful program into production. Sure, Google Product Ad Listings is commission based for some, but Google is now putting together a CPC component, so how long will a commission based system be available before perhaps a move to the CPC structure is finalized? Personally, I think Google is accustomed to CPC programs, Google Ad Words  users were used to it, and that’s the direction this is going. So, all of this would have left Microsoft as the best and easiest option, not requiring an order integration beyond placing a tracking pixel, which most retail sites have in abundance anyway.

Microsoft’s attempts to bank roll the program for 2 years, ultimately was deemed to be a losing system because not enough traffic was being funneled through on a consistent basis (ie, not the mass adoption needed). It would have been nice, to set up a commission cut that would have justified keeping the program running longer to see what could be done. However, this seems to indicate the main commission based selling platform will continue to be Amazon.

2: Microsoft is great at killing things.

Really, that’s not fair. Any big company which acquires other companies and technologies, will naturally see some not integrate or die off. Take Google, which acquired and killed Dodgeball, the precursor of Dennis Crowley’s Foursquare. However, after pushing Cashback and Kin out the door recently, it does seems there is some momentum loss from the big launch of Bing. So, when looking at Microsoft programs that are not time honored institutions (looking at you Office 2010), it may be best to have a Plan B when planning ahead.

3. Q4 2010 is going to be very different from Q4 2009

Working within many tightly controlled retail calendars, I can say that almost everyone agrees the October through December defines the success of the year. There is such a flurry of sales in this period, that half the year should be devoted to planning it. That means when looking forward to Q4, a few expectations should be understood now:

A: Google and Amazon will be dominant.

The resulting hole in the traffic network which Cashback resided in, will likely most benefit Google and Amazon as both will become default destinations for shopping. Consumers will be plugging in a product search on Google.com, and those shoppers will be led through a network of well tuned Google shopping networks, including moving through Google Product Search, Google Product Ad Listings,  Google AdWords (not really Product Extensions, too few people click through), and Google’s natural results. Within those networks, Amazon will siphon some traffic away, even while increasingly larger numbers of people are starting in the first place, Amazon.com

Amazon’s site structure and ability to feed the right products to the right people, with a site layout and order satisfaction emphasis that ensures happy customers, Amazon continues to set the standard for what comparison engines wanted to be.

B. Consumers will look for discounts, still.

The Cashback program did show that discounts are still very compelling for consumers, it’s just those consumers need something simple instead of waiting 60 days to see if they get their discount. In addition to constructing discounts, retailers should explore any alternative selling technique that offers a discount, from participating in group discount sites like LivingSocial or GroupOn, to offering discount loyalty rewards on social networks like Twitter and Facebook. More and more, it’s clear that online sales are about communicating to people, not just placing an obvious checkout button.

So, 2010 does continue to be interesting in the realignment of online shopping, so I would expect some more key changes by the time October comes around.

Nearly all major comparison engines push their merchants to install tracking code. On the engine side, its a valuable resource to know what is happening with traffic. For shopping engines, they work to send high quality traffic that is converting, however they don’t really know what is happening with that referral traffic unless their tracking code is present on the merchant side to show a sale. Seen from the channel perspective, this is an essential ingredient to know what their merchants partners are seeing and how to ensure the traffic service makes sense from a business perspective. This ensures the comparison engine can and does deliver a valuable add financially.

The key is pairing this interest with the more tightly centered interest of the merchant.From the merchant perspective, they are looking for immediate results. From recent experience, then PriceGrabber’s code should be considered.

First, PriceGrabber has managed to greatly extend their reach this year by adding Yahoo Shopping’s network of traffic to their family. While working with other major sites like CNet, PriceGrabber has an impressive network of partners sending traffic. The key is differentiating how this traffic performs. The PriceGrabber code helps report on this network, but then PriceGrabber’s account managers proactively work with the data coming their way. While some companies have greatly scaled back customer service in cost-cutting maneuvers, PriceGrabber has made their staff much more aggressive in 2010, by seeking opportunities and ways to grow client business. By adding the PriceGrabber tracking code, a merchant should expect to see increases in ROI as the data is gathered.

To be fair, there are other important items from other comparison engines. For example, NexTag also does a good job in working with their ROI tracker to improve results, and Shopzilla’s customer survey code can create a huge amount of benefit by aggregating costumer reviews on both the Shopzilla network but also on Google Product Search. However, for this write-up, PriceGrabber’s ROI code deserves a second look if it has not been tried already.

Understatement of the year? Perhaps. However, it’s a legitimately good statement that most advertising platform users are not very aware of what the average consumer looks like on a given platform. Recently, Shopping.com was kind enough to issue some information about their users. Great data, and worth taking a look at:

• Young: Median age is 45
• Affluent: Median income is $70K+
• Educated: 61% are college grad/post grad educated
• Balanced: a 60/40 split of females (60) and males (40)
• Active buyers: 70% bought online in the last 30 days

For age, if you are familiar with Harry S. Dent’s research (if not, check it out), then you know age is extremely important when calculating what a person will spend. The median age for Shopping.com is an excellent indicator that the average person on this site is old enough to make a decent amount of money, and young enough to have things and people to spend that money on instead of conserving for retirement. The median income is also tied into the concept that users on Shopping.com have the resources to do something with the income online since they are likely have disposable amounts of that income to use. The amount of educated users is interesting as well. It would make sense that if a person has spent the time and effort to complete school, they may be inclined to perform a good amount of research before a purchase is made. It’s an interesting theory, but it’s more likely correlated to the income distribution. That is, if you have money, it’s probably because you are educated.

The gender equity is important. Some sites like SHOP.COM slant heavily female, while Shopping.com has more of an even split. Important depending the product selection being advertised, and this case balanced enough reach both Full Moon and football enthusiasts.

In my opinion, the best part of the data is the online shopping bit, where 70% have purchased in the past 30 days. Since there are still people who have not purchased online, and more importantly, people who may not have purchased recently, this is wonderful indicator showing that on average the majority of people viewing a Shopping.com advertisement, are those viewers ready and willing to pull the trigger.

Since I don’t have data like this available on other shopping engines, I will be following up with a post on breaking down the demographics or other engines using Google/Double Click’s Ad Planner as a reference. As a merchant, if you can’t see each individual out there, it’s good at least to know what the crowd looks like.

Shopping has been sending feeds to Greenzer for some time, however this effectively moves Greenzer clients to Shopping if they were not there already, and also creates some exclusivity for Shopping in pulling traffic to their network.

In terms of the general landscape of shopping engines, a couple of conclusions can be drawn from this, both of which are not new. First, making a shopping engine work is a hard business (both financially and technically). Second,  consolidation is here, as the shopping engines will increasingly be a handful of isolated large companies with only some fringe players in the near future.  (Unless some engine does something revolutionary? Any takers?)

A final theory on eco-shopping can be put together, and this is supported by this news on Greenzer and a lot of other companies, that people do enjoy buying green products, but those people want to do the purchasing as a secondary benefit. So going eco-friendly, is not the primary motivation in purchasing, but it’s a nice benefit that will help drive the sale. It’s like buying a hybrid car with great gas mileage. It’s nice to reduce carbon emissions, but it’s even better to save at the gas pump. Ultimately the number of people looking to do ‘green’ shopping as their primary motivational driver is growing, but this segment is still a minority of purchasers.

In the beginning portions of 2009, there was seemingly little innovation on the horizon. Since around 2004, online shopping had been done in relatively the same fashion. Consumers typically used different search engines to initiate the purchasing funnel, and many times consumers would find themselves funneled into a comparison shopping engine based experience through paid and natural search listings. Now the patterns are changing, and it’s not the result of any one specific company or development.

The Rise of Amazon

In case anyone had missed it, Amazon has become a Goliath since beginning to sell books. Using a third party selling platform that is second to none, Amazon has single handedly changed the conception of a retail site. When Amazon first began to integrate third party sellers with their own platform, eBay was easily the king of the hill (or queen if you will) of partner selling. Using eBay’s auction format, individual merchants, with barely a keyboard, could easily sell their goods to millions of customers. Amazon however, pursued a slightly different format.

Amazon built a platform that allowed for typical single price transactions instead of time consuming auctions (although Amazon did try to do auctions as well). This platform was tear-jerkingly hard to integrate with, because of endless fields of product information that had to be created and kept updated in addition to orders, to ensure consumers would have a positive experience. Amazon was also keen on eBay’s empowered buyer model based on feedback. So Amazon evolved strict rules to ensure a seller was offering a quality transaction. Even today, if a merchant lowers their guard for 30 days, enough damage can build up to bring down the entire account. This adhesion to quality began to slowly retain costumers looking for a consistently good experience.

As Amazon grew, more third party sellers and greater selection came. Amazon poured resources into making sure products were understood systematically, so that product selection was accurate and comparable. Using the Amazon Unique Product Identifier (ASIN), a product listing could be monitored, controlled, and enhanced. By matching seperate sellers, Amazon could also build out robust product information by having the merchants tell Amazon, not Amazon having to find the information themselves. The overall product catalog grew not only in quantity, but also in detail. Having so much information on purchase activity, allowed Amazon to accumulate extensive merchandising information. Being able predict order volume and profitability, Amazon could now also sell products their merchants were selling and maximize profit. Amazon continues to expand their selection, and by providing lightning quick shipping and guaranteed satisfaction, Amazon has used it’s relationships to enhance the consumer experience to such an extent that Amazon is the default destination for consumers above any other retailer (meaning Amazon sells more online than anyone, end of story).

Covering All The Bases

Just in case the average Joe didn’t know about Amazon, they covered the bases by pressing hard on all fronts. Having an extensive product base, Amazon had a large selection to market, and also knew which products were the most valuable. Amazon aggressively utilized Google AdWords, among other paid inclusion systems, to place listings by related keyword searches. Rarely could you run a search for a certain product or type of product without seeing an Amazon paid listing. Of course, Amazon also had such such an extensive online presence, they also ranked highly for natural listings as well. Confronted on both fronts in paid and natural search, there was another channel of advertising available for Amazon to utilize.

Amazon looked to the shopping engines, and comparison engines running Amazon listings is one of the worst decisions they could have made. The reason is that shopping engine consumers are constantly driven back to Amazon. How many times will a consumer search for a product and hit Amazon, without actually starting at Amazon to begin with? A quick guestimate would be between 3-10 times, but the point is that consumers will just start with Amazon eventually. So using the comparison engines’ own systems, Amazon is slowly draining away market to their site. Brilliant really, except the next part is even better.

I Went To a Fight, and A Sale Broke Out

When two 800 Pound Gorillas meet in the forest, what does it look like? It looks like Amazon and Walmart sizing each other up in 2009. Walmart has been established as the preeminent retailer in the world for a number of years now. Utilizing an industry changing just-in-time inventory system, an extremely aggressive negotiating startegy to lower prices, and a flat out will to win, Walmart is the world leader in physical store sales. However, as many people are becoming aware of, online retail will dwarf physical store sales for nearly all companies, in the very near future. Walmart has it’s eyes set on being the destination for online purchases, and Amazon sees that coming.

What is truly brilliant, is how Walmart and Amazon used a dull, drained economy to fuel more growth. As consumers had their pocket books squeezed, consumers began to search for better deals. Walmart and Amazon had already become leading destinations for cost conscious shoppers, but in case anyone had missed the point, a price war developed between the 2 retail giants and played out in the media. Just the advertising from a typical sale can drum up sales, but exposure of having the press cover your sale, and essentially label both Walmart and Amazon as the destinations of price sensitive shoppers, that was priceless attention. Wonderfully orchestrated, whether completely planned or not.

Google Labs Get Cooking

2009 also saw the emergence, or perhaps reemergence of Google. The economic tail spin that was 2008 shook up a lot of people, including the folks at Google. Plans were changed, office expansions put on hold, workers moved around, etc. One other thing that happened, is the Googineers (a nod to Google’s engineer focused culture) looked at their presence in the retail area and began to pull together a new direction. Google Product Search had been in beta for a long time, but didn’t get huge amounts of traffic. That began to change within the last couple of years, especially with increased placement on the search results page. Google began to take products from Google Product Search (aka GoogleBase), and insert these offers with natural listings, as a type of search result supplement, known as the Google OneBox. The listings included picture, title, and price, store name and condition. Simple and efficient, Google began to absorb the comparison engine style listing into their results creating large amounts of traffics for retailers. Anyone see where this is going?

Google fluctuated the placement of these listings throughout 2009, but more and more consumers began to use them. It must of been such a clearly good idea, that someone decided these enhanced product listings should be part of the Google AdWords program as well. However, how do you do that?

Google had experimented in the past with the idea of a drop down box, known for a while as the Plus Box, and now known as Extension Ads. Essentially, product listings funneled from Google Product Search could be dropped down in some cases from the paid search listing, with a click of a “+” sign. It’s still a good idea, but for now the product listing choice quality is sporadic in relation to the keyword search, and a relatively small percentage of consumers click through the box currently. However, there is a more overt way to display the listings: just throw them out there like the OneBox. However, Google had gotten creative with the sauce again. Just like the auction platform of AdWords was a new step, Google went away from the PPC model. Instead, as is widely reported and seen in product search results, Google Product Listing Ads are now populating the upper right menu bar and driven by commissioned sales.

It’s pure speculation, but the sucess of Amazon, eBay, and and the rise of Microsoft’s Cashback program must have convinced Google that there was an opportunity in commission based selling that needed to be captured. With Google Checkout proving to be difficult to expand, Google went in a new direction. By leveraging the Google Affiliate Network and Google Product Listing Ads, which can be easily integrated with the Google Product Search feed and tracking code installation, Google could now be a part of the retail business without shipping a single item. PPC based ads are nice, but instead, for a merchant to simply pay a commission from each sale is a great business model. The wizardry is taken out of the accounting department, because ROI is easy to control and measure. Simply set a commission rate, and then balance that against your sales revenue and find the sweet spot. In the end, Google is served and so is the consumer, by having an easy time finding what they are looking for. Hey, finding what people are looking for is what Google specializes in, right?

What About CSEs?

All this leads up to a simple conclusion, it’s time for comparison shopping engines to change, or disappear.

That sounds drastic, but lets take a holistic view. Already through the course of 2008 and 2009, there has been tremendous pressure on the shopping engines to deliver high quality, high ROI traffic to merchants. Since the economy was contracting, and the consumer’s pie was shrinking, shopping engines became increasingly focused on delivering high quality traffic to ensure a sale, not just funneling part of the increasing avalanche of internet based revenue. This refinement process has already resulted in financial pressure on shopping engines that have not been able to keep up in the smaller, tighter pond. The stresses from other sources has made this pressure even greater.

By Amazon and Walmart increasingly becoming the default destinations for budget minded shoppers, this has begun to squeeze precious traffic away form comparison engines. The motivated shopper who is looking for the best deal is no longer starting at a shopping engine, but that motivated shopper is now going to Walmart and Amazon.

The next part of the crunch happens in finding shoppers who are in browse mode, and perhaps don’t care for Walmart or Amazon. That shopper is primarily doing searches on Google.com. When searching, the consumer is still bombarded with Amazon and Walmart listings, but they now have image enabled ads which easily catch the eye. Remember that web based shopping is all visual: you need to see the screen first before you mentally process the information. Having image enabled advertising on Google search result page is no small change. Increasingly these image based Product Ad Listings, Google Product Search Results, and Ad Extensions are pulling traffic right to the merchant without any help from comparison engines.

Remember the question from before, “do you see where this going”? There is where: Google has now begun to move beyond traditionally formatted text based results, and into more of a virtual result. Whether video, images, text, or now actual products, Google has taken shopping engine structure and begun to integrate this with their typical search results. Increasingly this provides less incentive for a consumer to bother going through another shopping engine, when they are essentially already using one in Google.com.

David vs. Goliath

Malcolm Gladwell rocks. Gladwell as an author is brilliant in his ability to draw connections and seek patterns in data which at first are not apparent, if not completely contrary to conventional wisdom. One of his articles focuses on the David vs. Goliath situation. This occurs when two parties face-off, and one party is seemingly over matched by the other’s strength. This situation occurs constantly, whether old Microsoft vs. old IBM, or new Microsoft vs. Google. Goliaths such as Walmart, Amazon, and Google are pursuing strategic goals which do not leave much room for traditional shopping engines. When considering rumors that Google is looking to limit the shopping engines’ ability to advertise using AdWords, the urgency level picks up a couple of notches. The key for the seemingly weaker David figure, is to change the battle ground and change the way of engagement. In this sense, the shopping engines need to change they way they do things, aka, use their apparent disadvantages as strengths. Being smaller, shopping engines can more easily evolve and maneuver.

Put simply, to change the tide, shopping engines need to become innovative again. At one time they were cutting edge in their ability to deliver multiple offers, additional merchant information and consumer feedback. Literally the CSE worked as a complete resource, aggregating purchasing data which helped merchants target consumers, and in turn which helped the consumer’s purchasing decision. Shopping engines need to find some of that creativity again. Whether this is done through dynamic social engagement, iPhone enabled scanning devices, or many other options is irrelevant. The point is that another large e-commerce shift is occurring, and if the shopping engines don’t get out in front of that change, then shopping engines face the prospect of becoming e-commerce relics of a by-gone area. That, would be too bad.