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Google Shopping Ads: 3 Reasons Why Google is Now Giving Away Ads for Free

In an exciting move in the SEA sector, search results for Google Shopping will primarily consist of free product listings. According to the announcement by Bill Ready, Google’s President of Commerce, free product listings should appear in US search results as early as the end of April and should be rolled out globally by the end of 2020. In addition to Google’s position in the booming e-commerce sector caused by the Corona crisis, the background to this move to free Shopping Ads could also be seen an attack on the dominance of Amazon and eBay in online marketplaces and product search results. This article covers the background, the details and assessment of Google’s move to free Google Shopping ads.

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Free Shopping Ads: Malte Landwehr’s Assessment

Malte Landwehr, VP Product, Searchmetrics“What lies behind the announcement of free Shopping Ads is Google admitting that they are not the first contact point for shoppers when it comes to product searches in the online marketplace: Amazon and eBay are clearly ahead of Google worldwide. In the US, Google also has the added competition of giants like Walmart and niche players like Etsy.

The Corona crisis has led to people making more purchases online because of stores being closed, so Google wants to increase its market share in product searches by making listings in Google Shopping free.

I also believe that the recent positive run that Amazon has seen in the stock markets is an important factor – analysts and investors find marketplace KPIs like ‘Number of Sellers’ or ‘Number of SKUs’ easier to understand than the obscure patents Google has in areas such as Natural Language Processing.”

Malte Landwehr, VP Product at Searchmetrics

How does Google Justify Offering Free Shopping Ads?

The announcement came as a surprise on the 21st of April, when Google’s President of Commerce, Bill Ready, announced in a blog post that Google Shopping would become partially free. The changes will initially only apply to US search results and are expected to take effect from the end of April 2020, with a global rollout planned by the end of 2020.

It is clear that Google’s decision is related to the impact of Coronavirus on search – the number of product-related Google search queries has increased significantly due to the global lockdown; not only searches for essential goods have increased, but also for toys, fashion and home improvement. With the mandatory closure of shops, many retailers are dependent on online sales channels and can now reach their customers much better thanks to this offer of free Shopping Ads.

Are all Shopping Ads Free?

  • No, paid Product Listing Ads (PLAs) will still be shown. However, it is not yet clear the percentage of space free PLAs will take up in the available placements.
  • It appears to be the case that Google will display free PLAs predominately for searches with little competition and lower CPCs. In addition, it is likely that free PLAs will not take up the five visible places in the Shopping box, therefore users need to scroll horizontally to see further product listings.
  • Retailers who want to continue to achieve a high level of visibility from their PLAs will therefore likely still need to pay to be in those top positions. This is similar to what can be seen on Amazon, where the top results shown on a product search results page are primarily paid ads.

What does free Google Shopping Ads mean for SEA?

Offering free Shopping Ads makes it much easier and cheaper for e-commerce retailers to win new customers and increase sales. For any business currently running SEA, Google’s free Product Listing Ads means advertising can be significantly cheaper, therefore provides an excellent opportunity for advertisers to expand marketing by placing more products in Shopping Ads to generate more traffic.

According to Google, anyone who has already been running Google Shopping Ads and has an active Google Merchant Center account does not have to take any additional steps to take advantage of free listings. For new retailers, Google intends on adapting their getting started process in the coming weeks and months.

How does Google Benefit from Offering Free Shopping Ads?

  1. Covid-19 will continue to accelerate e-commerce sales and Google wants to be a part of that boom. By offering free Shopping Ads, Google opens the opportunity up to new retailers and gives added incentive to current advertisers to add even more products to advertising campaigns via their platform. It goes without saying that more registered Merchant Center retailers means more market share and future revenue for Google. Retailers making use of the free Product Ads are potential customers for Google if they decide switch to paid ads; retailers would be incentivized to pay because the visibility of paid PLAs would be higher than the positions of free listings.
  2. Amazon and eBay compete with Google. Google may be the largest search engine in the western world, especially in the information sector, but when it comes to transactional search, Amazon and eBay are significantly better positioned as an online marketplace. Free Google Shopping Ads is a bold and strategically clever attempt from Google to claim their stake in the boom of e-commerce while improving the relevance of product search results for users.
  3. Disputes over product comparison websites and Google Shopping in the EU. Shopping Ads have been switched to a paid model in 2013 and have been lucrative for Google. However, Comparison Shopping Services (CSSs) filed a complaint against Google with the EU Competition Commission accusing Google of abusing its dominance and not giving other CSSs the opportunity for getting good placements on the search engine result pages (SERPs). In 2017, Google was fined 2.4 billion Euros by the EU. As a result, Shopping Ads were opened up to external Comparison Shopping Services who were legally permitted to place Shopping Ads on behalf of online shops. This resulted in more competition. In the Searchmetrics Google Shopping Study 2018, Google’s own share of Shopping Ad placements was 68 percent. The other 32 percent came from external CSSs. According to our Searchmetrics Google Shopping Study 2019, Google’s market share was ‘only’ 51 percent in 2019. However, the quality of the competition is under question as the majority of the other CSSs are marketing agencies placing Shopping Ads on behalf of retailers. As a result of this questionable behavior, some CSSs once more complained to the European Commission. If Google now offers Shopping Ads for free, both the EU and the CSSs have a weakened case for the Shopping Ads dispute with Google.

It’s a win-win situation with free Shopping Ads

Anyone working in SEA can benefit due to the potential for free ads to reduce overall advertising spend for organizations. Google is giving up a portion of their revenue in exchange for an anticipated large increase in new retailers using their free ads model. As a result, at some point after the crisis is over, these free advertisers might also be willing to pay for Product Listing Ads, which is clearly in Google’s best interest and helps to increase Google’s ability to compete with Amazon and eBay for product searches worldwide.