The October 1 deadline is approaching, when Google Shopping results will transfer over to be a completely paid service. Understandably, many advertisers and e-tailers are quite fearful about the upcoming change.
Agencies and SEM columnists aren’t exactly helping to educate and inform. The SEO community is too busy crying bloody murder while PPC agencies are blindly championing the new format as the way of the future for AdWords, since no text ads are required.
As a result, there is a lot of misinformation being spread in the Internet marketing community. The goal of this article is to clarify exactly what is happening, how it affects the way people search, and, ultimately, how you can fully leverage the shopping formats against regular text ads.
Product Listing Ads are practically universally misunderstood.
Many advertisers aren’t even aware of the product ad format, nor how to profit from them. They merely see the free version of Google Shopping going away, and wonder how they are going to get those sales back.
On the other hand, some are claiming that PLAs are the future and text ads are going to become ineffective and irrelevant.
Both assertions are over-the-top and wrong.
A Brief Overview
The free version of Google Shopping has been in existence for around 10 years (under various brand names). For most of that time, Google had mixed its shopping results into the organic search results. Organic shopping results drove quite a big volume of sales for smart advertisers.
In 2009, Google created “product ads” – the paid version of Google Shopping – and launched it in beta. The product ads were pulled from the same merchant center account which houses the free Google shopping. However, the ranking algorithm relied more heavily on bids and click-through rate (CTR) than “authority” (merchant reviews) and some relevance signals (e.g., more detailed data feeds).
In 2010, Product Ads was released to all advertisers. We’ve found that ad extension to be very profitable for e-tailers.
However, there were now two separate listings of product results on the page, which could be distracting to users. Therefore, in June 2012, Google simply started removing the free version from the results and moved the paid ads to the center. (Not to say there wasn’t a major profit motive there…)
Google shopping always did drive a tremendous amount of traffic. However, being free, most merchants used no tracking codes to track the traffic independent of that which derived from the organic results. Had they tracked this traffic segmentation, they would have noticed that up to 50 percent of their non-branded organic sales were driven from the shopping results. After the October 1 switch, Google is going to charge for the free traffic and sales it has been giving away for free!
A pain? Yes. Life changing? Only if you are willing to roll with the new reality, and your competitors aren’t.
Text ads worked fine six months ago and they work quite fine now, thank you very much. Product Search was quite fine (and profitable) six months ago and they work fine now as well. The big difference? Instead of your SEO team taking the credit for this, your PPC team will be doing it. But ultimately, you will still drive more traffic and sales to your site.
Moreover, the new landscape offers you a distinct opportunity to get in the game before your competitors catch on, letting you eat up more market share.
Putting Product Listing Ads in Perspective
There are three main types of search that users perform. Thus, there are three types of searches that you should monitor for CPA and volume.
- Branded search terms. (How many people were searching for your brand already, and clicked on a PPC ad once seeing your brand?)
- Non-branded search terms
- Product Listing Ads (How many are non-branded?)
As a reference point, we took a quick look at an average across our accounts of PLAs versus branded and non-branded searches for some key metrics.
As you can see, non-branded text ads performed far worse than PLAs. Non-branded text ads cost close to twice as much, converted at half the rate, and had a CPA that was 2 1/2 times of “regular” non-brand text ads.
That being said, all of our advertisers have their non-branded CPA’s in line with targets. As a result, they are currently getting PLA sales at a steal. However, as soon as the market gains equilibrium, that will change, as other advertisers bring the cost up.
Additionally, even now, the non-branded text ads drive close to twice as many sales as do the PLAs. (This was averaged over multiple accounts, some due to a lot of brand recognition and branded clicks, and some with virtually no branded searches.)
Often times, your PPC team will share a report with you showing that they are generating sales for you at a profitable CPA (cost per acquisition). However, if you perform a deep-dive analysis, you will notice that many of the sales are driven from branded search terms, which means that someone else worked hard to earn those customers’ trust (e.g., SEO, social media, print, or TV ads).
Meanwhile, your PPC team just took the credit. This means that they could be justifying overspending on other aspects of your campaign. This is why it’s important to differentiate between branded sales from non-branded sales, so you can spend your PPC money most effectively.
We’ve found that PLAs can drive as much as 60 percent of non-brand search sales, and at a much more profitable CPA. That being said, we’ve also seen many less impressions for PLAs. What’s responsible for driving the massive sales numbers have been the CPC (45 percent cheaper), and often conversion rates, which are on average 60 percent higher.
While this sounds great, it’s a bit worrying. Google currently gives anyone who spent a dime on PLAs before August a 10 percent ad discount until the end of the year. By the beginning of next year, however, the cost is automatically going up 10 percent. If the CPC goes up on such a profitable channel to the standard CPC, many advertisers won’t be able to continue paying for them.
With text ads, if you aren’t position 1-3 you may still have a tiny piece of market share on the page. But with PLAs, you are either on the 1st page (maximum of position 6) or have no exposure.
With text ads, you have complete transparency on keywords you are bidding on, allowing you to create a targeted campaign. But with PLAs Google matches your product up to keywords that they choose. (We’ve had clients matched up to broad and ineffective keywords such as “clothing!”)
With PLAs, at least there is enough transparency to show you which keywords you’ve been ranked for, as well as the opportunity to eliminate irrelevant searches. Other shopping engines such as Nextag and Shopzilla provide absolutely no transparency on this front!
Your PLA Strategy Going Forward
Ultimately, the downside to Google Shopping is that you don’t see exactly which products have been driving sales. This is sort of a big deal!
Many experienced and novice advertisers alike simply bid on their whole portfolio in Google Shopping at once, and see what happens. This is a terrible approach that borders on outright stupidity! It works for now, with the limited competition. Yet as competition heats up, if you are going to get burned paying the same in ad spend for a $1,000 product as for a $10 product!
Google Shopping PLAs represent an enormous opportunity for advertisers. Many of your competitors have not yet migrated to this new frontier, which creates a big opening for you to make lots of sales for a limited ad spend, while your competitors complain. If you take a more measured approach by segmenting your bids at the product level, you can retain market dominance and ensure long-term success.