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Are They Mad? 3 Reasons Why Google Google Shopping Ads Are Free

why google shopping ads are now free

In a surprise announcement by Bill Ready (President of Commerce), Google Shopping will become partially free from end of April in the US, rolling out to the UK and the rest of the world by end of 2020. The new Google Shopping listings will be a blend of free and paid Product Listing Ads (PLAs), and it’s likely free ads will only be prominent on less competitive and more niche product searches.

However, Google is clearly risking ad income by doing this. So what’s the upside for Google? And what the underlying reasons that’s made them make this move now?

How Does Google Benefit?

Google has been missing out for awhile when buyers search for products online – many consumers go straight to websites like Amazon and eBay, and skip Google altogether. And the Covid-19 lockdown has seen a surge on in online sales, a trend that is likely to continue. Google wants to maximise its presence in the lucrative product searches area, and arguably take the transactions them selves, as they have on other verticals like hotels and flights.

3 Reasons Why Does Google Offers Free Product Ads

1. Covid-19

Covid-19 will continue to accelerate e-commerce sales and Google wants to be a part of that boom. By offering free Shopping Ads, Google opens the opportunity up to new retailers and gives added incentive to current advertisers to add even more products to advertising campaigns via their platform. It goes without saying that more registered Merchant Center retailers means more market share and future revenue for Google. Retailers making use of the free Product Ads are potential customers for Google if they decide switch to paid ads; retailers would be incentivised to pay because the visibility of paid PLAs would be higher than the positions of free listings.

2. Amazon and eBay

Amazon and eBay compete with Google. Google may be the largest search engine in the western world, especially in the information sector, but when it comes to transactional search, Amazon and eBay are significantly better positioned as an online marketplace. Free Google Shopping Ads is a bold and strategically clever attempt from Google to claim their stake in the boom of e-commerce while improving the relevance of product search results for users.

3. Avoid Further EU Fines

Disputes over product comparison websites and Google Shopping in the EU. Shopping Ads have been switched to a paid model in 2013 and have been lucrative for Google. However, Comparison Shopping Services (CSSs) filed a complaint against Google with the EU Competition Commission accusing Google of abusing its dominance and not giving other CSSs the opportunity for getting good placements on the search engine result pages (SERPs). In 2017, Google was fined 2.4 billion Euros by the EU. As a result, Shopping Ads were opened up to external Comparison Shopping Services who were legally permitted to place Shopping Ads on behalf of online shops. This resulted in more competition. As a result of this questionable behavior, some CSSs once more complained to the European Commission. If Google now offers Shopping Ads for free, both the EU and the CSSs have a weakened case for the Shopping Ads dispute with Google.

Way Forward

This change has been triggered by threats from competition and regulators, and sped up by the surge in online sales due to Covid-19. Google is giving up a portion of their revenue in exchange for an anticipated large increase in new retailers using their free ads model. As a result, at some point after the crisis is over, these free advertisers might also be willing to pay for Product Listing Ads, which is clearly in Google’s best interest and helps to increase Google’s ability to compete with Amazon and eBay for product searches worldwide.

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