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.

Merchant Impact
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:!/2012/05/building-better-shopping-experience.html

Danny Sullivan’s Take from SearchEngineLand:

Rimm-Kaufmann’s Take from the RKG Blog: