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With searchers choosing Amazon over Google for product searches and eBay resurgent, will Google have to launch its own marketplace to keep up?
Online retailers are a major source of advertising revenue for Google but shoppers are increasingly turning to Amazon as their shopping first port of call.
In 2010 24% of shoppers began researching on Google verses 18% on Amazon, however in 2012 this had almost completely reversed with 30% on Amazon and only 13% on Google.
Google is clearly aiming to be the destination for product searches with the launch of Product Listing Ads (PLA). However, some industry experts are wondering whether to win in this space Google will need to go beyond simply advertising products and launch a fully-fledged marketplace.
According to Channel Advisor’s CEO Scott Wingo:
We've long been believers they would need to go there to counter the momentum that Amazon has.
Too complicated for SMEs
The cost-per-click (CPC) structure which Google uses is much more complex than the commission model which is used by marketplaces.
On both eBay and Amazon it is effectively free for sellers to advertise their products with a fee only being paid on when an item is sold. This makes it risk free for retailers to list all their inventory and simple to calculate margins.
Google misses out on a massive market by not having a simple to use offering for SMEs.
Marketplaces work better internationally
Amazon and eBay make it extremely easy for retailers to sell internationally and they have been aggressively pushing their customers to sell overseas.
Using Adwords to advertise products overseas requires complicated setup i.e. multi-currency website and a separate Google merchant feed for each country.
Cross border trade is a huge growth area and Google does not have a compelling offering in this space.
Mobile shopping works better on marketplaces than on Google
Mobile is growing fast but conversion rates are approximately a third of desktop. This is worrying for Google as lower conversion rates mean retailers will be prepared to pay less for their CPC traffic.
Mobile shopping online via Google is also a disjointed experience compared to the all in experience of buying through Amazon and eBay high successful marketplace apps.
Low value products don’t lend themselves to CPC
As Google charges on a CPC basis, lower value items are often not economic to advertise unless a site has a very high conversion rate.
On marketplaces, fees are charged on a commission basis and so there is no barrier to listing inventory.
Marketplaces are multiplying
The success of Amazon’s fixed price market has caused other major retailers to set up marketplaces of their own. In the UK Tesco has its own marketplace and in the US, Walmart and Sears. Overall, marketplaces are only going to grow in importance.
Perhaps Google is already heading in this direction
Finally, there are some pointers that Google is already testing the water for a marketplace style solution.
In San Francisco it has launched a trial service called Google Shopping Express which allows customers to receive items on same day delivery from a range of major retailers such as ToysRus and Whole Foods.
The offering is basically a fixed price marketplace with the whole experience taking place on Google’s site.
Google’s Trusted Store programme certifies stores which offer a good customer experience and gives a level of order guarantee. This is not dissimilar in many ways to the guarantees, metrics and feedback system provided by the major online marketplaces.
The scheme is live in the USA and is currently in beta in the UK.