How will the launch of Google Shopping as a separate division in Europe shake-up the digital advertising market?

The marketing sector can be a complicated place as new marketing tools and techniques are launched, almost on a weekly basis. Powered by The Drum Network, this regular column invites The Drum Network's members to demystify the marketing trade and offer expert insight and opinion on what is happening in the marketing industry today that can help your business tomorrow.

Google plans to launch Google Shopping as a separate division in Europe.

Google has announced plans to split out its Google Shopping product into a separate division in Europe, and allow competitors to bid.

A “By Google” tag started appearing on Shopping ads in the wild on the 27th September, along with this surprisingly short blog post announcing their intentions.

Summarising this change, taken from the @googleeurope twitter account:

This looks as follows in the wild:

This change comes of the back of receiving a 2.4 billion euro fine by the EU commission for abusing its dominance in the search market to promote its own Shopping product, over that of other Comparison Shopping Services.

As a primer, Comparison Shopping Services (or CSSs) used to be a fantastic way for retailers to expand their reach and drive incremental revenue outside of Google Search. However, with Google Shopping moving to a paid model in late 2012 and the explosive YoY growth of the platform, these have fallen out of fashion – estimates have suggested up to 90% drop in traffic to these sites, claimed to be linked to Google promoting its Shopping product.

The argument for (and against) this view is worth a blog post on its own, however this post will look at the impact this change could have on the market.

The one big caveat is if the EU Commission accepts this as a suitable solution to this anti-trust issue. Margrethe Vestager, EU competition chief stated that “It is at this point in time of course impossible to say what will happen but obviously market reactions will be one of the things that we’ll be taking under consideration”. Foundem, the lead complainant in the case have already raised concerns over this proposed change.

As a consumer, there is potentially few noticeable changes aside from the tag showing who is serving the ad, and the option to click it and jump to that engine. The help centre states that:

“Offer links promoted in Shopping ads (unless expressly specified differently for a particular ad format) need to lead users directly to a page that allows them to buy the advertised product.“

Clicking the “By [engine]” link will send you to the product results page on that engine, but this suggests that Google wants to ensure the primary links direct consumers to a page they can buy from, rather than simply linking to another comparison engine (harming the overall user experience and devaluing the Shopping results)

As an advertiser, this seems to be primarily a threat to performance. With the auction model opening up to a wider pool of competitors, there is the potential for CPCs to go up, and ROI down, a concern given the strong performance we generally see from Shopping campaigns.

The economics of how this will play out are up for debate however, with the margins CSSs work to determining how much they can invest in appearing on Google Shopping. We could potentially see some short-term exploration of the platform by CSSs, that may be pulled back over time if the numbers don’t stack up – time will tell.

On the other hand, there is the opportunity to grab even more real estate through appearing both through Shopping and on CSSs, although there needs to be consideration around the cost benefit of doing so.

Finally, if CSSs find success from this change there is the potential for new, innovate sites or products to gain coverage and take off, helping advertisers find new partners with whom they can diversify their spend.

We’re looking forward to experimenting with how we can continue to access Google Shopping inventory and measuring the impact this has on our client’s campaigns!

Deyna Lavery is paid media director at RocketMill

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