Is Google Monetizing Google Product Search through Paid Search Ads

9 Sep

In an article by Frank Kochenash Vice President Performance Services, Mercent, Frank thinks that Google is monetizing Google Product Search through Paid Search Ads and has the numbers to back it up.

Really fascinating stuff and when I combine this post with what a little birdie at Google shared with me….well, if you don’t listen  you could be left behind the curve. It’s time to stop looking at Google PPC, PLA and GPs as distinct channels and start looking at blended metrics to get a better picture of performance.

“What’s going on with Google Product Search (GPS)?” is a question I’ve received a lot lately.  GPS was a smoking hot channel for most of the last 18 months.  But traffic and sales comps since about March 2011 have been down, in some cases substantially.  Well, several things are going on, but I think a major one is that Google is starting to more aggressively monetize GPS by shifting traffic away from Google Shopping results and toward its revenue generating programs – Adwords (paid search ads) and Product Listing Ads (PLA).  This is a hypothesis of mine, and I have no inside or other information from Google confirming or denying this.  Below I share why I think this is happening and some of the implications for retailers.

First, some very brief history on GPS performance:

  • 2010 January-September:  GPS performed awesomely.  We were realizing YOY comparable store sales well over 100%.  In addition to great work by us and our clients, this was due to easy comps against the 2009 recession and some tactical missteps Google made on GPS in 2009.
  • 2010 October-December:  Q4 2010 YOY comps got harder because (among our client base) the consumer spending recovery started in Q4 2009.  Also, Google changed some aspects of the user experience that negatively impacted GPS traffic.  In particular, in mid-October they made changes that emphasized local results and, we believe, larger stores.  We saw a dramatic downtick in traffic and sales, but Google acknowledged the mistake and corrected it before the brunt of the buying season.  Short story is that GPS still put up very impressive numbers in Q4, but not like earlier in 2010, meaning comparable store sales were in the 20-50% range.  (In hindsight, their experiments in October and November 2010 look like initial forays into monetizing GPS that had too much of a negative impact on GPS traffic.)
  • 2011 January – June:  The comps started declining further.  Declines accelerated in April, May, and June.  By late spring we were seeing comparable same store sales for GPS in the single digits and lower.  Median account yoy sales growth for GPS only, went negative by late spring.  Essentially, Q1 2011 was still pretty good for GPS in terms of YOY growth, but Q2 was poor to very poor.

Several things are probably affecting GPS results, but I believe one of the biggest is that Google is monetizing GPS by shifting traffic away from GPS and toward its revenue producing channels.  The industry has speculated about whether and how Google would monetize GPS.  Some have speculated that Google would eventually make GPS a CPC program like other comparison shopping engines.  This is a legitimate option, but I think what we’re starting to see is that Google will stick to their tried and true revenue generator, paid search ads, as the vehicle to monetize traffic that comes to Google for shopping.  PLA, in this perspective, is a mere experimental riff on paid search ads.”

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