Product listing ads are highly coveted by retailers
Online shopping ads are big business for Internet search engine providers such as Alphabet’s (GOOGL) Google and Microsoft (MSFT). At Google, for instance, shopping ads are believed to grow at three times the rate of regular search ads.
For retailers, Google’s product listing ads, which appear at the top of product search results, are highly prized. Traditional retailers invest in Google’s shopping ads as they look to expand their online presence, competing with Amazon (AMZN) for online shopping dollars. Since Amazon started buying Google’s product listing ads in 2016, it has been competing with the likes of Walmart (WMT) for ad slots.
Consumers begin online product search at marketplaces
However, Amazon is said to have recently stopped bidding for Google’s product listing ads. Why would Amazon do this when Google’s product listing ads are highly coveted by retailers keen to overturn Amazon’s fortunes in the online retail market?
Amazon may have based its Google ad decision on data reported by global package delivery company United Parcel Service (UPS). A growing number of consumers are beginning their shopping journey at marketplaces rather than search engines. Last year, for instance, UPS found that 38% of consumers began their online product search at marketplaces such as Amazon and eBay (EBAY), compared with 35% in 2016. Just 15% of consumers began their online product search on search engines such as Google, Bing, and Yahoo in 2017 and 2016. As UPS also found that Amazon dominates online marketplace product searches, it may be unlikely that Amazon gets burned by ditching Google’s product listing ads.