San Francisco - Google unveiled major changes to its
shopping business that will likely prove controversial in the
e-commerce world.
Starting this year, product search results for
users in the US will be influenced by how much retailers and advertisers
pay, a company executive said. In the past, product search results were
based mainly on relevance and the programme was free.
Google, the world's most popular internet search engine, will rename its service Google Shopping from the current Google Product Search.
"We
are starting to transition Google Product Search in the US to a purely
commercial model," said Sameer Samat, vice president of product
management at Google Shopping.
"This will give merchants greater control over where their products appear on Google Shopping."
Revenue
Google
has been in the product listing and search business for about a decade.
During that time, it has provided merchants with free access to
shoppers.
The company made money by running paid product search
ads along with the organic, or unpaid, product listings, according to
Eric Best, CEO of Mercent, which helps retailers sell through Google and
other e-commerce websites such as Amazon.com and eBay.
"Today, that model goes away," Best said. "It's a very big deal."
The
changes may ultimately help Google extract more revenue and profit from
its retail advertisers, which account for up to 40% of Google's
advertising base, according to Best and others.
Google Product
Search drives about $650m in annual sales in the US and about $1.3bn
globally, ChannelAdvisor, which helps merchants sell online, estimated
on Thursday.
"That's the free sales that are going to disappear unless they decide to pay," Scot Wingo, CEO of ChannelAdvisor, said.
Under
Google's new system, retailers may have to spend an extra $130m a year
in the US and $270m globally, to fill that sales hole, he estimated.
Crucial
"The winner in this is Google," Wingo said. "That extra spending is pure margin and will drop to earnings per share."
Some of the retailers ChannelAdvisor works with are questioning Google's motives, Wingo added.
The
changes will kick in by October, which does not give merchants much
time to adjust to the new system in time for the crucial holiday
shopping season, he said.
For retailers, there are upsides and downsides, according to Mercent's Best.
"The
downside is that retailers are going to have to pay for performance
when it comes to e-commerce traffic and revenue driven by or through
Google," Best said. "The free traffic is disappearing."
The
changes may be controversial in the internet community because Google's
search results have traditionally not been influenced by money, Best
said.
"Pay-for-placement to some degree is an alternative to
purely organic relevancy results," he said. "The fact that shopping
results will be more closely tied to bid-for-placement will not sit well
with all advertisers."
Quality argument
The new
programme will help retailers make their products more visible to
shoppers searching on Google. The old system was difficult for Google to
police because retailers could list a lot of products for free. If they
have to pay, it may reduce clutter, Best said.
"Having a
commercial relationship with merchants will encourage them to keep their
product information fresh and up to date," Google's Samat wrote in a
blog on Thursday.
"Higher quality data - whether it's accurate
prices, the latest offers or product availability - should mean better
shopping results for users, which in turn should create higher quality
traffic for merchants."
The quality argument is suspect, according to ChannelAdvisor's Wingo.
"That's
a slippery slope because this could apply to websites, not just product
listings," he said. "Why have organic search at all? Anyone can set up a
website and use it for spammy purposes. That's what Google is supposed
to deal with."
Amazon and eBay will likely be affected by
Google's changes because the e-commerce giants currently get a lot of
free traffic from Google Product Search. In the future, they will have
to pay for that, Wingo said.
However, some merchants may decide
to list more products for sale on Amazon's and eBay's online
marketplaces, which would be a boon for those companies, he added.
