When users search for a particular product, Google displays a widget showing relevant products from various retailers who are billed according to an auction-based CPC model. The most important advertisements are Product Listing Ads (PLA). Find out more about Google Shopping in this glossary entry.
Google Shopping: spread and market share
According to data from Searchmetrics SERP Features Monitor, around 17 percent of desktop search queries in Germany display a widget with Product Listing Ads. For mobile search queries, the figure is slightly lower at 13 percent. In the UK, around 15 percent of desktop and mobile searches display a shopping ad box.
The story behind Google Shopping
In order to better respond to user interest in transactional search queries and to provide a counterweight to prominent product search engine Amazon, Google has rebuilt and expanded its shopping service in recent years. Initially, the service was called Google Froogle and was paid for by retailers, until it was renamed Google Shopping in 2013. Then it switched to an auction-based advertising model, where retailers can post their products via a feed in the Google Merchant Center and store a variety of data including the maximum price they were willing to pay to Google for a user click. The highest bidder gets their product displayed in the shopping ad.
Google Shopping will mainly be free in 2020
In April 2020, Google announced that Google Shopping would largely be free. From the end of April 2020, organic, unpaid shopping listings would appear in US search results to begin with, and global rollout planned for the end of 2020. Google has stated that this would not mean the end of paid product listing ads, however. The background to this change of heart by Google is likely to be the dispute over Google Shopping with the European Commission, product comparison portals and competition from Amazon, which is commonly used as a product search engine.
Criticism of Google Shopping: breach of EU antitrust rules and opening up to external CSS
With Google being responsible for ad management and charging around 20 percent commission, a number of product comparison sites sued them for abusing its market dominance. The European Commission upheld the complaint in 2017, imposing a fine of 2.4 billion euros and calling on Google to ensure greater competition.
In response, Google allowed external Comparison Shopping Services (CSSs) to bid for shopping ads and, as a market participant, it now bids for the ad spaces alongside the external CSS. Incidentally, retailers cannot place ads on Google Shopping themselves; an external CSS – or Google itself – has to act as an intermediary. To be approved, the external CSSs have to manage the bidding for a minimum of 50 online shops. They use cheaper CPCs to attract online retailers, meaning their margins are often significantly lower than the 20% commission Google charges for ad placement.
Since then, diversity has increased. In Searchmetrics’ Google Shopping 2019 study, we calculated that Google itself has a market share of 51.1 percent, while 35.1 percent of shopping ads are managed by marketing agencies that also offer CSS services and place shopping ads on Google Shopping on behalf of retailers. According to the study, price and product comparison sites like idealo, PriceRunner and RedBrain have an average market share across the UK, Germany and France of 13.8 percent.
Compared to last year’s figures, competition has increased. In Searchmetrics’ Google Shopping Study 2018, Google’s own share of shopping ads displayed was 68 percent, with 32 percent coming from external CSSs.
But what about the quality of this competition? The highest market share of external ads on Google Shopping is owned by the new CSSs, mostly online marketing agencies that participate in Google’s auction process on behalf of retailers, while the “typical” price/product comparison sites, who took their case against Google Shopping to the EU, make up a significantly smaller share.
Google Shopping ad formats: PLA, Smart Shopping Ads and Showcase Shopping Ads
A Product Listing Ad (PLA) contains an image of the product as well as reviews and information about the retailer and its price. This conventional form of shopping ad also includes information on the CSS through which the ad was booked – in our example for the keyword “garden tools”, Google ranks first, second and fourth, with smarketer and Productcaster in third and fifth place, respectively:
Nowadays, other forms of shopping ads also exist, which will be briefly introduced in the following.
Google Shopping smart ads
Google Shopping smart ads are conventional product listing ads, generated in the form of a remarketing campaign. Not only will these ads appear in the typical shopping widgets in Google search results, they are also on the Google Display Network, on YouTube and in Gmail. Google manages the bidding process for these campaigns, too.
Google Shopping showcase ads
In a showcase ad, when users click on a regular product listing ad in the search results, they aren’t redirected to the shop itself. Instead, the ad expands and shows products related to the search term. This is what it looks like:
The advantage of this showcase ad is that retailers can then advertise multiple products or a whole product category from their shopping range. This gives users far more choice before they click on a specific product, taking them to the shop. Here, the retailers have to pay for the ad click.
Google Shopping: registering
In order to create a Google Shopping ad, online traders have to register either in the Google Merchant Center or with a CSS of their choice. As mentioned above, CPCs can be cheaper with an external CSS than if you register the ad via Google.
Retailers then have to set up a product feed and upload it to the Merchant Center or CSS. The ad placements on Google Shopping are based on product data accessed from the product feed. This data includes name, description, price, brand and article ID, an image of the product, the URL, amount in stock, condition and GTIN or EAN number.