New rules for Google Shopping
Cannibalization as a response to regulation
After the announced record fine of 2.42 billion euros, not much happened at first. Despite the entrepreneurial separation of Google Shopping from the rest of the group and the opening of the new "Comparison Shopping Services" (CSS for short) tool for competing price comparators, Google's market share in the area of Shopping ads remained at almost 100% until the end of 2017.To further boost competition, Google is forced to create incentives for competitors and advertisers - in order to avoid another fine from the EU Commission. With a time-limited incentive program called "SpendMatch", the market leader grants financial rebates to advertisers who buy their ads via external service providers and creates lucrative incentives to switch to a third-party provider by introducing an artificial margin on its own click prices. According to EU Commissioner Margrethe Vestager, 15% of Google Shopping ads came from external providers in March 2018, and in June the figure was already over a third (Bloomberg, June 2018). As Google continues to be interested in boosting competition, a profitable business area is opening up for CSS service providers.
More competition - little added value for consumers and price comparators...
Shopello, billiger.de, By Buy Bye and SHOParade are the names of the new competitors that have been vying for the coveted spots on the Google search results page for several months now. Some of these are price comparison portals that have been established for years, while others are curious one-way websites with incomplete content and minimal functionality that now appear prominently in Google search.For price search engines and therefore the real plaintiffs in the whole story, however, the basic problem remains: Traffic to them via Google Shopping increases only minimally. Only a targeted click on the name of the CSS provider within the Shopping ad leads to the price comparison portal. All other clicks take the user directly to the retailer's store. As a result, price comparisons become even more like pure intermediaries and placers of advertising material in the interplay of supply and demand, and can only play out potential added value on their own website to a limited extent. However, digital agencies are often much better positioned to use their clients' advertising budgets efficiently, particularly in this area of planning and placing advertising space.
... but clear efficiency benefits for retailers, manufacturers and agencies
While the situation for pure online comparison portals has changed only minimally, CSS offers clear potential for advertising customers. Various tests already show that campaigns via external CSS partners currently have a clear efficiency advantage over Google Shopping campaigns. Up to 20% of click prices can be saved or invested in additional reach. This is currently benefiting fast-moving companies in particular, which are taking advantage of the opportunity and adapting their Shopping ads accordingly.in the meantime, online retailers who are currently consciously or unconsciously not taking advantage of the short-term cost benefits are not unaffected: As a result of the efficiency gains made by competitors, their own campaigns may feel a negative impact, at least in the short to medium term.In addition to agile advertisers, agencies are also benefiting as they quickly set up their own price comparison websites for their customers to enable them to participate in Google's Comparison Shopping program. In order to clearly differentiate themselves from dubious providers and to position themselves vis-à-vis new customers, transparency with regard to pricing plays a particularly important role: firstly, reputable agencies must pass on any discounts and rebates to their customers and secondly, the media costs and costs for the use of the in-house developed price comparison website must be shown separately and transparently. There must be no room for hidden margins and it is currently unclear how long these advantages will remain in place. However, open access to transparent CSS models and the uncomplicated use of these tools definitely provide eCommerce providers and agencies with welcome cost benefits in the run-up to Christmas.* Tobias Zehnder is co-founder of the Zurich-based digital marketing agency Webrepublic. The "IAB Digital Agency of the Year 2017" designs, implements and optimizes performance and advertising campaigns on search engines, display networks, social media and YouTube. The agency employs over 160 people in Zurich's Enge district (as of July 2018), including marketing experts, data scientists and software engineers. The team speaks 12 different native languages, including German, French and Italian, as well as English, Chinese and Japanese. This enables Webrepublic to serve international customers in all major markets in Europe, North America and Asia. According to iBusiness, Webrepublic was the sixth-largest agency in the DACH region at the end of 2017 in terms of performance budget under management.
