Google Shopping Platform Evolves, Amazon Threat Grows

Google (NASDAQ:GOOGL) has made a significant change to its Google Shopping platform. Starting next week, any business can list its products for sale on the platform for free, which is a major shift. Since 2012, listing products on the platform was reserved for businesses that purchase Google ads.

The company plans to run the Google Shopping platform in a way that supports small businesses during the coronavirus pandemic.

“For retailers, this change means free exposure to millions of people who come to Google every day for their shopping needs. For shoppers, it means more products from more stores…,” Bill Ready, the head of Google’s commerce division, wrote in a blog post.

Ready joined Google from PayPal (NASDAQ:PYPL) to lead the commerce unit. The change in the Google Shopping platform also involves a new partnership with PayPal about payment account linking. The PayPal network serves about 25 million merchants. Now, the merchants will be able to list their inventory on Google’s platform. Notably, the PayPal network serves about 300 million consumers. They will have access to more merchants through the Google platform.

Google Shopping platform opens up for free

The decision to make the listings on Google Shopping platform free was strategic. Google has been losing online product search traffic to marketplaces like Amazon. UPS Pulse studies showed that most people use marketplaces to look up the products they want to purchase. In 2019, 96% of online shoppers used a marketplace.

Usually, the Google Shopping platform serves as a marketplace extension for retailers looking to boost their online sales.

The shift in online product search traffic from general-purpose search engines to marketplaces fueled the rise in Amazon’s advertising business, which comes at Google’s expense. In the fourth quarter, Amazon’s advertising division recorded a 41% revenue growth. In contrast, Google recorded a 17% jump in its advertising sales in that quarter. Facebook’s advertising sales rose 25% during the same period. Generally, Amazon has been eating into Google’s advertising market share. With Amazon’s own platform becoming popular with shoppers, it can afford to cut its spending on Google ads.

Rebuilding the product ads business

By opening up the Google Shopping platform to all merchants, Google might be trying to reclaim shopping traffic from Amazon.

At Amazon, advertising is only a tiny part of the business. In contrast, advertising is Google’s main revenue source. The company faces pressure to counter Amazon’s rise in the advertising market in order to rebuild its product ads business.

At $1,212 per share, the stock of Google parent Alphabet trades at a 20% discount to its 52-week peak.