Product Level Ads: Tribulations Of A New Traffic Source

Free clicks from Google Shopping were a gift. We all knew it, loved it, and were holding our collective breath because we knew one day it would go away. As you are probably well aware, that day is sometime in October of this year and the transition has already begun to take place.

Beyond the obvious financial impact on businesses caused by having to pay for something that was once free, are Product Level Ads (PLAs) really a bad thing? Is Google getting greedy? Or are they just taking another step in their eternal quest to improve user experience?

To get the low down, I called on an old friend, Erick Barney, VP of Marketing at Motorcycle Superstore, and asked him how PLAs were impacting his business. The following is a recap and analysis of our conversation.

The impact of PLAs and paid shopping clicks extends far beyond the simple explanation of paying for clicks. At a high level, there are four fundamental factors that are working together to produce a new Google Shopping environment for etailers:

  1. Paid clicks from PLAs are increasing
  2. Free clicks from Google Shopping are decreasing
  3. Amazon sales are declining
  4. PLAs are cannibalizing paid search

Each of these four factors must be considered in order to understand the overall impact of PLAs on the business.

Paying For Clicks You Previously Didn’t Have To Pay For Stinks

Businesses are now faced with a decision to allocate budgets to PLAs and Shopping – sources that have been historically free. Compound that with a difficult ad format to manage and it’s a recipe for frustrated marketers.

Even a well-optimized Google Merchant Center Feed provides little control over the product level messaging displayed on Google and bid management is limited to auto-targets per product filter in AdWords.

It’s noteworthy that Google appears to be testing pretty heavily during the rollout of paid PLAs and it shows in the analytics. There are no year over year comps so we’re limited to week over week and the volume is totally erratic – there is no week over week consistency other than an overall trend of volume increasing over time.

Verdict: Bad for advertisers.

Free Clicks Are Going Away

While paid clicks are on the rise, free clicks continue to decline in volume. Fewer free transactional clicks mean rising ad cost and even more frustrated marketers. Year over year comps show a dramatic drop-off in free Shopping traffic, not surprisingly roughly the same volume as the rise in paid traffic.

Verdict: Bad for advertisers.

The Amazon In The Room

The business most negatively impacted by PLAs is Amazon because Google has drastically reduced their presence in Shopping – a channel that must have been one of their leading referral sources because they were listed #1 for virtually every product level search.

If you’re not familiar with the Amazon affiliate model, it’s a percent revenue share (in the neighborhood of 10-20%) and Amazon gets to keep the customer. This last part is probably the most significant factor because the lifetime value multiplier for a customer you don’t own is one.

It’s worth noting that Erick and his team are savvy feed optimizers and were pushing hard on Amazon prior to the PLA transition. Ever since the transition year over year comps are falling off a cliff. However, with the absence of Amazon, there’s a significant opportunity to gain market share in Shopping…the downside being that you have to pay for it.

Yet, I still see the removal of Amazon from PLAs as a net positive change for the average etailer because the fallout gives the business an opportunity to manage the client relationship to long-term success and a higher lifetime value.

Verdict: Good for advertisers.

PLAs & Search

The relationship between PLAs and search is unique. I’ve always been a fan of product ads in search and I believe the format of PLAs is ideal for product level queries in search:

Because of the high relevance of PLAs for product searches, PLAs have begun to cannibalize search volume. This is neither a good or bad thing, so long as the product being displayed in PLAs are highly relevant.

A business with well optimized feeds will be rewarded by PLAs in search. This has been one of the better integrations of the technology and highlights everything right Google has done in this ad format.

That said, when the query gets more generic, Google shows a fundamental lack of understanding in user intent:

 

In this search the user shows no brand, vendor, or style preference yet Google has opted to show a specific tire rather than an informational ad offering insight and the opportunity to learn about motorcycle tires. Hopefully the Googlers will figure this one out and remove PLAs from non-product level searches.

Verdict: Null.

Adding Up The Damage

To be fair, the PLA transition is still in progress so jumping to conclusions is premature. That said, the net sum of PLAs is not positive on the business. Erick said it best: “PLAs present a highly disruptive change to a previously stable environment. We’re at Google’s mercy while things shake out and we’re not going to know the full impact until October.”

Check back at the end of October when I’ll be writing a follow up where we dig into the numbers at the conclusion of the transition.

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.

Related Topics: Channel: SEM | Google: AdWords | Google: AdWords: Product Listing Ads | Google: Google Shopping | Search & Retail

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About The Author: is the Vice President of Performance Marketing and Analytics at SellPoints and is based in the San Francisco Bay Area.

Connect with the author via: Email | Twitter | LinkedIn



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  • http://twitter.com/Kevin_Lee_QED Kevin Lee

    PLA will be a huge topic at SMX and the other fall conferences. That alone is probably a reason to go for retailers. If you don’t have your PLA strategy AND tactical plan in place now, or soon, you likely won’t have a very Happy Holiday.

  • Monique_at_Bloosem

    Don’t you mean Product Listing Ads i.s.o. Product Level Ads?

  • Sergey Lucktinov

    PLAs has been performing very bad lately. When they just switched we could get $1000 sales on $100 spent but now the cost for clicks skyrocketed from 20 cents to almost 1$ and conversion rates dropped significantly.

  • Pat Grady

    We’re killing with the PLAs, but we’re biased — when free, we weren’t involved — now, we own these!

  • http://twitter.com/bennyblum Benny Blum

    Yes, @Monique_at_Bloosem:disqus, you are correct. My bad.

  • http://twitter.com/bennyblum Benny Blum

    @google-dbe575136fef4effbe57fbbd332a8a25:disqus, it’s easy to get caught up in what a web savvy user does rather than the average user. While I’d like to jump to the conclusion that users know to go directly to Shopping in order to get complete listings for the products they’re looking for, making such an assumption would leave a lot of money on the table for those who do make product specific searches.

 

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