Google's strategy to counter Amazon will reshape the e-commerce dynamic
Google's announcement April 21, 2020, shook up most of the e-commerce experts. Google will start freely referencing merchant offers on its Google Shopping platform. It is undoubtedly starting a real revolution in the online advertising world. It could be seen in the short term as an act of generosity from Google towards retail brands and e-merchants, while it lays the foundation of a new strategy for the Mountain View behemoth.
Bill Ready, President of Commerce at Google, announced that this news would be effective "in late April in the United States, and by the end of the year for the rest of the world". Patience, therefore, before seeing this offer arrive in the Middle East.
A change of direction for Google: Backing up for a better bounce back
By writing off a significant portion of its revenues, Google surprises the online advertising world and goes back on its founding strategy to probably rebound better. This decision is a revolution since most of Google's revenue comes from online advertising (85%), including 60% from Search (Text Advertising plus Shopping).
Google Shopping is an essential pillar of the e-commerce activity of many sites, it allows to visually highlight the products of merchant sites backed by the search page when the Internet user types a product-oriented query (e.g. "buy google Chromecast"). It is a paid showcase for the advertiser who pays for this intentional traffic generated to his site - what is called pay per click or PPC.
Google tackles e-commerce giant Amazon head-on
This decision to make Google Shopping free is part of the American giant's desire to develop its marketplace activity launched in 2018. Its intention is to attract e-merchants into its nets, and offer a wide selection of products to its customers. Google has come to tackle Amazon head-on in its territory. Following the example of Jeff Bezos' company which has developed its advertising solutions in recent years, Google is seizing the opportunity to diversify its revenues by aggressively entering e-commerce space.
Google could also be inspired here by Amazon's "recipes" by nurturing a virtuous circle between supply and demand:
This new version of Google Shopping should attract more retailers and new e-merchants, offering consumers a wider selection of products. The assortment surge from merchant sites as well as the decrease in advertising investments, made free on Google Shopping, could drive prices down - thus benefiting consumers. For e-merchants, this also holds the promise of new opportunities. They will have to redouble their efforts on the quality of product data sheets to emerge naturally in the top positions - tied directly to SEO best practices. The budgets saved will perhaps be used to finance a spot in the premium advertising insert; premium placement pricing should rise sharply. Nevertheless, we may wonder whether the savings made by advertisers on their marketing budget will not be shifted to other marketing levers outside the Google ecosystem.
The market forecasts a decrease in advertising investments of 15 to 20% over 2020, mainly caused by Covid-19, with a more extended recovery period than for the financial crisis of 2008 (which lasted one year). This new strategy from Google clarifies the fact that they do not relay anymore on their mature search product for velocity and growth. They are moving forward from awareness and consideration to conversion in a bold move to capture then dominate the whole purchase funnel.
Will Google quest for dominating the general online customer journeys, affect their image and positioning, from a dominant respectable information provider to a pushy sales giant?