Online Retailers Are Devoting Hundreds Of Millions To A Google Product That Hurts Amazon

Red dress Calvin KleinMacy’s / Calvin KleinA Calvin Klein dress advertised by Macy’s using the new Google format.

Online retailers devoted 19% of their search ad budgets to Google’s new “product listing ad” (PLA) format, which shows photo suggestions to shoppers who are browsing the web, according to Marin Software. Marin handles $US6 billion in online ad spending, of which about $US500 million comes from retailers for search ads. (And Marin may not even be the single biggest buyer of these ads, according to Jefferies Equity Research.)

The growth in PLAs is significant because search results for Amazon have been pushed down Google’s search results pages by the new ads, which often form a roadblock at the top of the page above other search results. before Google introduced the PLA format, Amazon’s listings were often the first natural or unpaid search result on Google.

Marin gave us these numbers, based on data from its retail clients who spend $US500 million on search ads collectively:

  • Total spending

    PLA spend increased 70.9% from January 2013 to January 2014.

  • PLA share of search ads bought
    In January, 19% of ads were PLAs, up from 12.7% the year before.

    In February, 18.3% of ads were PLAs, up from 12.4% the year before.

There was also a cost-per-click price increase of 33% – 37%, indicating that bidding demand for the ads is becoming more fierce. “Google users have responded well to the highly relevant, image-based ads and as a result we’re seeing this continued rise in advertiser adoption. We expect by the end of 2014, retailers will allocate 33% of their paid search spend to PLAs,” Marin CEO Chris Lien tells us.

Major retailers like eBay, Macy’s and Walmart have embraced PLAs with gusto. But there has been one conspicuous holdout — Amazon hasn’t spent a penny on them. The company declines to say why it won’t play Google’s game. As long as Amazon continues to demur on PLAs, links to its products get pushed down the page for many products. However, some of Amazon’s smaller brands such as Zappos and are heavy users of PLAs — indicating that they are effective. In search, advertisers usually cut their budgets if the ads don’t generate sales.

This is what the PLA format looks like:

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

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