Google Credits Stronger Retail Vertical Sales for US Growth



The revenue growth in the US accelerated for Google

The United States remains the growth market for Google (GOOG). The revenue growth in the US market accelerated for Google in 2Q15, as the chart below shows.

Google cited the main reason for this growth as strength in the retail vertical market, which increased its ad spending on Google’s search platform. During the July 16 2Q15 earnings call, management mentioned that the company is trying to improve the online shopping experience for users when they search for a product on Google. Google is trying to reduce the friction for users while searching for a product and then purchasing it without going through too many steps.

This makes e-commerce ads much more valuable for retailers, which is why they’ve increased their ad spending on Google’s search platform.

Article continues below advertisement

Google continues to make enhancements to PLAs

Product listing ads (or PLAs) are the ads that appear alongside a search query, featuring a product image and price details. These ads also provide a direct link to the product page on an e-commerce website where users can shop online.

According to a report from Channel Advisor, Google is now testing some changes to this ad format by informing consumers how much cheaper a particular product is compared with an average online price. This is a beneficial development for consumers who want to select the cheapest product when shopping online.

This development threatens Amazon (AMZN) and eBay (EBAY), as PLAs allow users to start their e-commerce transaction on Google rather than going through these pure e-commerce platforms.

This isn’t the first time Google has enhanced its PLAs. A few months back, Google added a “buy” button alongside the PLAs. This would let users complete e-commerce transactions on Google’s site instead of completing the transaction on a third-party platform.

In addition to Google, Facebook (FB) and Twitter (TWTR) also introduced similar features in their e-commerce ads. Twitter launched an in-tweet “buy” button for users to complete e-commerce transactions instantly on its own platform. We discussed this in Why Twitter plans to increase its e-commerce ad conversion rate.

You can get exposure to Amazon by investing in the Consumer Discretionary Select Sector SPDR Fund (XLY), which has 7.1% exposure to the company.


More From Market Realist