Why adding a button that lets people buy things directly through Google could be a big win for the company

Google larry pageJustin Sullivan / GettyGoogle CEO Larry Page

Google could be on the verge of introducing a “Buy” button alongside some of its mobile search ads, Alistair Barr and Rolfe Winkler reported for The Wall Street Journal Friday evening.

This means that when you search for a product on your smartphone, Google’s product listing ads (which currently show prices and link to sites where you can buy goods) will let you order things directly. You would complete your purchase within Google without having to navigate to the individual sellers’ websites.

It might not seem like a huge change to users, but it could have a major impact on the company.

In a note Monday morning, analysts at Baird Equity Research highlighted three ways they think adding a “buy” button could be a huge win for Google:

Buy Button GoogleHow PLAs currently look on mobile

It would help counter competition from Amazon, Alibaba
For the last several years Google has looked on aghast as more more people start their product searches directly on Amazon, instead of Google, cutting the search giant off from valuable ad revenues.

It’s generally quicker and easier for users to search for and buy something on Amazon — where they have more information about a product and their payment information already in the system — than clicking a sponsored link from Google and then being directed to another store’s website.

Adding a buy button that would allow users to purchase things through Google itself could eliminate the extra steps and potentially help reverse the trend.

This step further into ecommerce search would also keep Google’s ads competitive with offerings from Amazon and Alibaba.

“We have long argued that Google would benefit from adding e-commerce marketplace features and functionality to search results,” analysts write. “We previously suggested that an acquisition of eBay and/or PayPal would be one way to gain immediate scale; however, adding ‘Buy’ buttons to Google product listing ads suggests the company is building, not buying.”

Improve mobile ad pricing through better attribution

All advertisers want to be able to see how ads they have paid for lead directly to sales. Generally, shoppers who click on ads on their phones are less likely to actually make a purchase after they click because it can be less convenient to shop on mobile sites versus on desktop or through a retailer’s app.

The company has seen its “cost-per-click” steadily declining, including a 7% year-over-year fall last quarter. But if Google can show advertisers that the new buy button reduces friction and increases users’ likelihood of completing a purchase on mobile, it can potentially charge them more for advertising.

“We believe that adding ‘Buy’ buttons on product ads is one way for Google to ‘close the loop’ more effectively with merchants and advertisers, stretching from the top of the purchase funnel (i.e., driving traffic to websites and product listings) all the way through processing transactions,” analysts write.

Provide Google with valuable transactional data

If Google finds itself with a wealth of new data about what people buy, it will be able to better target ads based on buying patterns. Because Google only gets paid when users click an ad, the better the ad, the more the company makes.

Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.

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