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Google Shopping: New Revenue Stream Or More Of The Same?
The ad community loves free products, and if those products are effective at meeting goals, it’s only right to eventually pay for them. That was the thesis of my last column, which looked at the outcry over Google replacing organic shopping results with paid ad units.
Now that marketers have concluded this is a worthwhile investment, they’re doling out the cash. At least, they’re supposed to be. While Google’s Q4 earnings beat Wall Street estimates, we haven’t seen a Google Shopping line item to see if this was a boost to the bottom line. Based on several conversations I’ve had with marketers, Shopping may not have brought in revenue like Google hoped.
Google Shopping Is A Must
I’ve been fortunate enough to spend the past few weeks in the company of a few senior brand managers. The overwhelming consensus among retail brands was that they had to invest in Shopping results. So they simply did the easy thing, and shifted (up to) 25 percent of their paid search budgets to shopping. For Google, this is a case of robbing from Peter to pay Paul.
Diverting money from one search channel to another is sound marketing strategy, especially if you haven’t budgeted for a new channel. As one person confided, shifting money out of paid search may be one of the dumbest things he’s done, but he had no choice because competitors were doing the same thing.
While Shopping results were successful at driving conversions (hence the outcry when they switched to a paid format), they do not have a long history of returning the investment into the paid units, an important distinction.
Brands Shift Budget To Shopping
Brand managers have their search budgets, and the very sophisticated ones can forecast conversions on a monthly basis. Now, there’s a panic rush to the shopping results, and CMOs can’t be left out. The easy solution is to allot the same amount of budget to line item Google, and divert some to the new tool to keep up with the Joneses. That should be the biggest of Google’s worries right now, as it’s potentially dangerous.
Philosophically, paying is a good idea for advertisers. But Google’s issue is that there’s no proof in the pudding that Shopping generates more revenue. The Q4 earnings didn’t show a boost in revenue caused specifically by shopping, and that’s telling. If the end of the year is about one thing, well, it’s shopping. It’s also the period when Google began charging for shopping placements, and I know from multiple conversations that no one chose to ignore the program when it made the jump.
The onus is now firmly on Google to demonstrate that Shopping results deserve more investment. As nearly everyone I spoke with attests, there is no decision-making process about buying Google Shopping. If you’re in retail or e-commerce, you have to do it, full stop. Great news, except for the fact that no one bothered to up the total amount of money they were sending to Google.
So now, Google is in relatively unfamiliar territory, forced to prove the value of a new product. Google’s goal is the same as every other ad tech vendor: bleed money out of a brand budget that was previously earmarked to go elsewhere, whether its TV, print, or radio. They’ve been remarkably successful building a business around search, and now they need this Shopping search product to differentiate itself. Otherwise, they’re just running a product that cuts into their own paid search dollars.
Will Shopping Boost The Bottom Line?
The goal of charging for the shopping ads was to boost the bottom line with a new product, so they’re obviously trying to steal those brand dollars. They would not have flipped the switch from organic to paid if they had other intentions. Moving money from one channel to another doesn’t do shareholders any favors, which is why Google needs to demonstrate some ROI, and fast.
In the short term, Google isn’t going to lose any money or credibility, because the money going to Shopping was meant for paid search anyway. But in the long term, the company stands to make a lot more profit.
I’m not naïve enough to sit here and say that the product won’t work. With all the engineers and brainpower at Google, they’ll rejigger the system so that it delivers ROI for the customers buying space in shopping results. They already have a sizable advantage over any other ad technology companies, which is that they’ve convinced the ad buyers that this is a must-buy. Now, they just need to prove that it justifies the dollars going in.
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