Last week, Google rebranded its Google Express platform as Google Shopping and announced several updates to where and how Express-powered transactional listings could show, including expanding Shopping Actions to image search and YouTube. The response to these updates was largely the same as when Google Shopping Actions were first announced back in March 2018 – that Google is looking to minimize friction in purchasing directly on Google properties with an eye towards directly competing with Amazon.
That may well be true, but one update from last week that has largely gone under the radar in terms of its implications for the battle with Amazon is probably the most important on that front. Shopping Campaigns with Partners is a meaningful move towards giving product manufacturers greater visibility into the impact of Google ad spend on product sales and reduces one advantage Amazon has on its rival.
Manufacturers Finally Have Direct Visibility into How Their Google Co-op Dollars are Working
Product manufacturers, many of which don’t sell products directly through their own online properties, have long competed in paid search through the use of co-op dollars funneled to retailers. Retailers take these funds and use them in promoting products from the manufacturer and report back to the manufacturer on the impact of the ad spend that the manufacturer has paid for. This helps retailers get more aggressive in paid search as well as increases the promotion of the manufacturer’s products beyond what the retailer may have been able to profitably afford without the use of co-op dollars.
However, one weakness of this equation has been that manufacturers are at the mercy of retailers in reporting on the impact of those co-op dollars. This is in contrast to the visibility brands have on Amazon, where manufacturers can promote their products directly and immediately see the product views and sales associated with that ad spend.
That all changes with Shopping Campaigns with Partners, as manufacturers will now have clear visibility into the ad spend and sales associated with their products through the different retailers they partner with. This should make it easier for manufacturers to assess the impact of co-op dollars and optimize distribution of that investment to the partners that are best able to put it to work, which should in turn prompt retailers to innovate to compete for manufacturers’ promotional spend.
It’s obviously not quite as direct as Amazon’s setup, but it’s clear that this is a giant leap forward from the previously murky reporting conditions surrounding co-op investments in paid search. Google’s announcement of the update touts a 72% increase in click share for Estée Lauder Companies after partnering with a US retailer to promote its fragrances.
While Google Express (now rolled under the Shopping moniker) and Shopping Actions are rightly viewed as a strong parallel to Amazon’s offerings, traditional pay-per-click (PPC) Shopping ads are still Google’s bread and butter when it comes to product searches, accounting for 89% of all non-brand paid clicks for Merkle US retailers in Q1.
It’s still not totally clear what the future of Google’s commission-based offering is, given that these listings come at the expense of PPC ads in many circumstances. As such, the only situations in which its profit positive for Google to push users to convert directly through its properties are those instances when a user is so likely to convert through a Google checkout process that the expected commission outweighs the ad revenue from a PPC click.
The Shopping Campaigns with Partners update is a clear effort to bolster traditional PPC Shopping ads and lure more investment from manufacturers that may have shifted budget over to Amazon or were considering doing so in light of the clearer reporting available from Amazon. Google clearly isn’t done with the PPC model in retail just yet.