BrainTrust Query: Will Google Shopping Force Small Merchants Into Oblivion?
Through a special arrangement, presented here for discussion is a summary of a current article from ScreenPlay InterActive’s blog.
Google Product Search is now morphing into a new pay-for-placement service called Google Shopping, changing a decade old organic search feature into a revenue based advertising tool. The move is in direct conflict with statements Google previously made against such practices. They claim the remodel will result in "a better shopping experience."
But will it? Or will it mean that organic (unadulterated) search results are that much closer to extinction?
Shoppers using search to find products certainly appreciate faster, easier, more relevant results and will welcome the new tool if it offers them the advantages Google is touting. Remember, Google eclipsed all the competition because its algorithm was lauded for being so good. But what if the changes mean that smaller merchants can no longer afford to list their products in Shopping and the Shopping SERPs (search engine results pages) lose variety on both the product and seller sides? Will consumers notice? Will they care?
There are many questionable issues related to this change, but the crucial one for smaller retailers is the prospect of paying fees for what has been a free service. Until now, e-tailers with some web savvy could utilize Google Product Search as a way to compete on a relevance-based level playing field alongside even the biggest merchants. In the next few months, that will vanish and the prospect of having to bid for position against the likes of Amazon, Macy’s, Walmart and others will stack the odds in favor of sellers with big advertising budgets, just as it does with other Google advertising tools. Smaller vendors that are already at a financial disadvantage because they cannot outbid or outspend the big guys in other areas of advertising, are again going to feel the pain.
![[Image: Google Shopping Ads]](/public/images/discussions/16069/google-shopping-still.jpg)
In principle, this is not a new phenomenon. Former search competitors silenced by Google existed with this sort of model, yet search has been viewed by users and described by Google as necessarily being "unbiased and objective." Now, impartiality is being disguised and undermined as the search giant deftly changes this consumer feature and co-mingles its listings with organic search results.
Fairness is sometimes a gray area in a market based economy. There is nothing that guarantees exactly the same opportunities to small entities as large. So does Google have a responsibility to stick to their mantra and keep all forms of SERPs pristine and equally inclusive to all?
Discussion Questions
Discussion Questions: Is Google compromising its objectiveness by transforming Google Shopping into a pay-for-placement service? Will the change hurt small retailers or will they adapt to the new system?
Google’s operating philosophy (clearly posted on their website — click “about Google” on the main page) says their searches are fair and unbiased. Google Shopping is a different piece of the operation, from what I can gather. A search off the main page should be different from a search within Shopping. As long as this as true, it’s much less of an issue, especially if they are upfront about it as they are now (identifying paid advertisers).
Google is compromising its objectiveness by moving towards a pay-for-placement service. This change has the potential to hurt small retailers if they cannot afford to pay for placement.
Consumers have relied on Google to search the entire web and deliver relevant results without bias. Yes, each search page could feature ads from merchants, but the core search seemed to be unbiased.
If Google’s pay-for-placement changes search results, and if consumers are unhappy with the outcome, Google may have inadvertently opened the door to its own competitors, allowing them to take consumers and revenue from Google.
Anyone who follows tech stocks at all is familiar with the current push to “monetize the clicks.” It’s all about stock valuation. One of the big reasons for Facebook’s IPO disappointment is that investors who look past the popularity of the site can’t find the money model. (Stay tuned, I think Facebook will get there sooner than many expect.)
As for the search experience — who ever looks past “page one” anyway? It’s only if I am in a very specific hunt for a vendor or bargain that I do. And shopping sites already pop up the “Sponsored Links” in some sort of identified banner at the top of page one. I blow right by them, and I think most others do as well. This is where Macy’s and Walmart should show up with paid advertising unless there are other, more prominent banners made available. But these will be even more readily identifiable to shoppers, so those who don’t want them can just “click on by.”
Of course, for Google there will probably be so many paid sponsors that I may actually find out what “page three” of a search looks like!
Online consumers tend to be savvy about their web tools, I believe consumers looking for objectiveness will recognize Google Shopping as a pay-for-placement service and adapt their behavior.
Most small retailers will adapt — that’s the beauty of the web — and potentially even benefit from the distinction of not being a pay-for-placement business. Unfortunately, as history has shown, there will be casualties in “progress.”
Google compromising? Its objectiveness? Offering a better service to shoppers? Doing something different to what it previously said it would/wouldn’t do? Fairness is sometimes a gray area in a market based economy?
Have I somehow stumbled into an alternative universe?
The single most valuable thing a person has is attention. Google earns that attention by providing a valuable, relevant, fast, simple, and (at least initially) unbiased experience — whether that is in areas like web search, or maps/local, or email, or shopping comparison.
Once that attention is earned, the challenge is how to make money without undermining the very value that earned the attention in the first place. Google has proven time and again that it knows how to walk that line — with AdWords/AdSense, Google Places, GMail ads, etc. I’d bet on Google’s ability to do it again with Google Shopping.
Google is indeed transforming more into a pay-for-everything type of business model, however, let’s remember that Google needs to make some money too. Ideally, I wish that small merchants could maintain their level playing field but that’s not going to help keep Google profitable, and so it is what it is. I think it’s fine.
Let’s be realistic here. Is anyone actually getting purchases from the system as it is? No one I know uses Google Shopping. I’ve only used it on the rare occasion that I can’t find something locally or with the regular Google Search services.
I don’t think this will be a big deal over time. Small businesses will adapt or find better ways to spend their cash.
Pay for placement obviously generates revenue for Google. It also may indeed improve the search experience for users. Google Trusted Stores appears to be an example of this.
Is there something wrong with taking money for paid inclusion that improves service for users?
At face value, no. But the problem lies when such payments are not disclosed to users (this is an FTC guideline). Google does disclose it may take payments for Google Hotels and Google Flights.
The other problem is that Google’s prior “don’t be evil” stance denigrated this tactic. Here’s a passage from Google’s IPO filing (courtesy Danny Sullivan):
“We believe it is very important that the results users get from Google are produced with only their interests in mind.”
Google has leveled the playing field and improved relevance for all content, including merchants. Now that it is dominant search engine, it IS the playing field.
I will not pay to play, as Amazon Prime is the best service going online. All of us would like to get more revenue from our customers, but with an over-saturated marketplace, there are too many other free options to business online. If everyone starts charging for this, than B&M stores will get a second look from consumers. I see a silver lining for small business if they take advantage of better promotions inside their own stores.
I saw this as inevitable. For most, Google Product Search (soon to be Google Shopping) produces the highest total sales and highest conversion rates compared to all other shopping comparison engines like Pricegrabber, Bizrate, Shopping.com, etc. And yet while these other lesser performing engines charge, Google has not.
Theoretically, the only one that should get hurt are consumers. The price at which a business sells its goods is based on a minimum target net profit coupled. Combined with cost of goods plus operating costs (aka overhead) you end up with a minimum selling price. Google’s move to a pay-per-click model simply increases advertising cost overhead for all businesses large or small. If the larger business already has lower costs of goods or lower operating costs per unit sold, that advantage will continue.
The article seems to infer Google’s move will somehow create a disproportionate effect on small businesses. Not true. Large businesses need to make a minimum profit just like small businesses. So all competitors will adjust pricing to maintain net profit with higher advertising costs, or, competing businesses will keep prices the same and make less profit (or look elsewhere for savings to offset the additional cost.) I would think due to fierce competition, pricing is already at the minimum to make the minimum net profit. So theoretically there should be a small increase in pricing if all other costs stay the same. So the question is, will the additional advertising cost result in a net increase in operating costs large enough to cause a noticeable increase?
Many small retailers make the mistake of not taking a 360-degree view of their finances. So this WILL be *perceived* among many smaller retailers as a negative change, being an extra costs cutting into their profits. But if the smaller business has survived competing with larger businesses up until now, they should be able to continue to survive, unless the larger business gains some other new competitive advantage that lowers their operating cost or cost of goods that the smaller business could not also take advantage of.
Let me come at this from a slightly different angle. Smaller, independent retailers have long understood that they can’t compete directly at brick ‘n mortar with the large mass-market retailers. They have learned to differentiate their assortments by focusing on discretionary, high-quality, niche products, targeted to a very specific customer base. Their value proposition is built around these carefully selected assortments, state-of-the-art product knowledge, and carefully nurtured customer relationships.
All this holds true in the world of e-commerce as well. Smaller retailers aren’t competing directly with larger players heads-up. Paid search doesn’t strike me as any more challenging for smaller retailers than organic search. The products that they are selling are not likely to be the kinds of things that larger companies are going to be targeting with paid search.
For the time being I do not see this as a threat to small merchants. As several have asked, what are the stats on Google Shopping?. I know I don’t use it as I have not really seen the benefit. It is much simpler to enter your search from the mail page rather than the extra few clicks to enter Google shopping. Also I think that when consumers realize that this is a paid venue, the ones using it may just decline. You know how much we hate being sold to.
It is just a matter of time until all free, popular websites will begin to monetize their services. Will this hurt smaller retailers? Not really! It will cost them something for a service they got for free in the past, however, there’s no such thing as a free lunch anymore.
Actually, think of it as expanding to bi-directional search: when I search Google, I am looking for info the Google search algorithm will automatically deliver to me. At the same time, there are marketers who are possibly “searching” for people like me who are searching for certain things.
I see nothing whatsoever wrong with Google essentially telling ME that this or that marketer is interested in telling ME their story, based on what I have looked for. Google does not link THEM directly to me, rather Google offers me a link to them, appropriately labeled.
Maybe I’m interested, and maybe I’m not. But it is actually an added value to ME to know that a marketer has expressed an interest in reaching me. The choice is mine as to whether to step out of my anonymity (to the advertiser,) and contact them.
I heartily approve this expanded service, and hope it gets even better.
I should add to my earlier comment that Google’s manipulation of its basic search algorithm to benefit its own commercial and political interests has been asserted on quite a few occasions. I do not approve of these nefarious practices, although I defend 2-way searching as explained in my earlier post. These matters are controversial, to say the least, and far transcend the interests of small retailers. Two opposing viewpoints were expressed in today’s Wall Street Journal:
The charges….
The defense.
Obviously Google is trying to monetize their products to a greater extent, but it’s too bad they feel the need to offer a less than credible alternative justification, “data quality.” In the same way that they turned off most referral keyword data for organic search (but not paid search) and claimed it was for “security.” If paid data is more accurate than free data, then why doesn’t Google charge to be on Google maps? If referral keyword data from HTTPS sessions is a privacy issue, why offer it to advertisers? At the end of the day, the consumer will learn (implicitly) what features are paid vs. free, and will make their own judgement about when to use each feature.
In the world of dead-tree phone books, consumers understood that the “white pages” were an objective list of businesses, but the ads in the yellow pages where paid. Both were useful references, but were viewed differently.
Google product search used to feel like a “White Pages” feature, and now it will feel like a “Yellow Pages” one.