Shop on Google

According to the WSJ, Google is taking the final step to becoming an online marketplace of sorts. The Journal says:

The buttons will accompany sponsored—or paid—search results, often displayed under a “Shop on Google” heading at the top of the page. Buttons won’t appear with the nonsponsored results that are driven by Google’s basic search algorithm.

This is big news and potentially at odds with the company’s long-standing position of being the ‘gateway’ as opposed to the ‘destination’. So why is Google doing this; the answer is very obvious yet often overlooked. Despite Google’s top keywords being ‘service’ related terms e.g. Lawyer, Doctor etc as shown by this excellent WordStream infographic, it’s physical goods commerce that helps drive revenue.

To demonstrate, AdAge listed Google’s largest advertisers and highlighted in bold are retailers:

Rank Advertiser Ad Spending
1 Amazon $157.7
2 Priceline Group $82.3
3 AT&T $81.9
4 Expedia $71.6
5 Microsoft Corp. $67.1
6 Experian $61.7
7 Walmart Stores $59.7
8 Sears Holdings Corp. $59.2
9 IAC $53.9
10 Apollo Education Group University of Phoenix $53.5
11 Bankrate $51.9
12 Fiat Chrysler Automobiles $47.5
13 Berkshire Hathaway $45.7
14 Comcast Corp. $45.2
15 Home Depot $40.2
16 Blucora $39.1
17 Verizon Communications $38.4
18 Best Buy $38.0
19 Yahoo $36.2
20 Target Corp. $35.8
21 Bank of America Corp. $35.8
22 General Motors Co. $35.5
23 Macy’s $35.1
24 Allstate Corp. $35.0
25 State Farm Mutual Auto Insurance Co. $33.

So almost a third of Google’s top advertisers are retailers and offcourse it’s largest customer, Amazon, is also a direct competitor. From the same AdAge piece:

Walmart Stores and Sears Holdings Corp. (parent of Sears and Kmart) cracked the top 10, and four other retailers made the list of the 25 biggest spenders. However, there’s good reason to have expected more stores to make the ranking, considering that search is the dominant digital-ad format for direct-response advertisers like retail brands. Retailers are expected to spend more than double what any other brand category will pay for digital direct-response ads this year, according to eMarketer.

So retailers – both large and small – embraced Google search and have been imperative to it’s success. The question now is, will Google’s increasing efforts to connect consumers with stores help their ad customers or perhaps offer a challenge? The WSJ article nails it:

Some retailers said they worry the move will turn Google from a valuable source of traffic into a marketplace where purchases happen on Google’s own websites. The retailers, who wouldn’t voice their concerns publicly, fear such a move will turn them into back-end order takers, weakening their relationships with shoppers.

Google has a fine balancing act to ensure but then again, maybe it has no choice; as more and more consumers prefer mobile and use apps to shop, this move is perhaps needed to stay relevant. (I’d love to hear your thoughts on this in the comments).

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