Google’s Product Listing Ads are a big threat to Amazon

If that term is unfamiliar to you, I promise the concept isn’t. If you go do a Google search for any kind of consumer product, like coffee machines, you’ll see some results populate at the top of the page. Pictures, with prices under the name of the product, and where it can be found for that price.

Sounds familiar, right? It’s a lot like Amazon, except these are Google sponsored results. That little sponsored box at the top of the results screen, which is surprisingly functional, is paid advertising space. If you click on the actual product, you’re redirected to the landing page for that product, on the site selling it.

Amazon, who for years has asked us to skip the middleman retail store, is virtually gone from those search results.

These Product Listing Ads, or PLAs, have been there for some time. Last fall, Google began to charge for the ability to have products in there. A revamped, cleaner look would bring more clicks, and more ad revenue. This is, after all, Google. Nobody knows search, or ads, better.

Where we sometimes lose sight of search is in the name itself. Google has become a verb as much as a noun, where “Googling” is often used in place of “web search”. Because they run the search engine, and control the algorithm, Google has the ability to manipulate how things on the page manifest. That’s not to say they alter the search algorithm to suit their whims, but it’s clear their ad dollars are paramount to them with the placement and pay-to-play nature of PLAs.

Ama-who?

This is great for retailers, like Macy’s or Target, who are always looking to drive traffic to their websites or retail stores. They pay for advertising, or rather a premium for a PLA spot, and we see their offerings prominently displayed on our screen. In one fell swoop, the old school retailers are back in the game.

You don’t get to be a Walmart or Macy’s without knowing a thing or twelve about how retail works.

This also affects the entity which helped to damage the brick-and-mortar retail model, which is probably a welcome effect of all this. Amazon, who for years has asked us to skip the middleman retail store, is virtually gone from those search results. When I did that search for coffee machines, Amazon was right under the PLA spot, but it was a normal Google blue-text result. Amazon, though toward the top of the results page, is now relegated to being the runner-up.

This isn’t always the case, though. When I did a search for “Chromebooks”, the PLA results were once again right at the top. Amazon, however, was much further down the list, behind official product sites and Google+ listings. This, despite the Samsung ARM Chromebook being a top seller on Amazon for quite some time.

Why it may not matter

This is great for Google, as it generates ad revenue, but not so much for consumers. The reason we shop with Amazon is ease of use, as well as price. With Amazon, we can set up an account, then shop with ease. Redirecting to partner sites drives traffic, but may not result in sales, simply due to the process we have to trudge through in purchasing the item.

Amazon is, by now, its own unique destination, capable of generating its own traffic.

Amazon is, by now, its own unique destination, capable of generating its own traffic. For many doing online research, Amazon is a site they visit for reviews as well as price comparison. If this PLA strategy were to become a problem for Amazon, they could simply pay to have their results in the PLA box like anyone else. Right now, they barely register on the list of top PLA advertisers, which may be a missed opportunity for them.

Not so fast, Amazon

If the Jefferies research team is correct, Google will soon allow for in-ad purchases to be made from PLAs. The only feasible way to do so would be to have those purchases occur with our Google Wallet accounts. This would be intrinsically dangerous for a company like Amazon, which shows losses year-to-year.

If Google allows for in-ad purchases, which are linked to our Google Wallet account, they will have turned their Google Shopping page into a true Amazon competitor. Couple that with their interest insame-day delivery and purchase of Buffer Box, and you have some very competitive practises happening.

You don’t get to be a Walmart or Macy’s without knowing a thing or twelve about how retail works. Those happen to be two companies who advertise more via PLA than Amazon does. They also happen to be two companies with positive earnings, whereas Amazon continues a downward trend of middling results.

It’s just a box with pictures and prices to you and me, but to retailers it could mean getting their piece of the pie back from the likes of Amazon.