“What is the opportunity on Google Shopping relative to our Search ads?”, someone asked me at a conference after I presented some of our findings from the Search Strategies Report.

What business are you in? “Retail”, they said.

“How about multiplying your activity by 5?”

It is amazing how fast things move!

Over the past few years, we have had the feeling that Google shopping was eating budget from — what used to be called – Google Adwords.

The evolution of the offering was very fast, and ads with product images simply beat text ads every single time. Whereas we didn’t have any statistical evidence of this change, we now have an entirely different data set which suddenly confirms the trend, namely the explosion of Amazon Ads, which are a representative of the same evolution of shopping over search.

Over the past few years, we have had the feeling that Google shopping was eating budget from -- what used to be called - Google Adwords. Click To Tweet

eMarketer does projections on Amazon Ads growth like in this recent article. Update of their figures is very frequent, as real figures always seem to be higher than expected. The difficulty also comes from Amazon’s financial reporting, where apparently Ad revenue is not a separate line item yet. Not significant enough for them, I wonder? By the most recent figures, Amazon Ads is predicted to grow to a proportion of 24% of Google Ads in 2019.

In our survey, we asked a cluster of leading teams in paid search, what the mix of their service offering was, and we were not really surprised to see >shopping< to come out top together with SEO and Paid Social. 80% of the leading paid search teams also deliver “shopping”.
services directly deliver

Perhaps you would then expect that these teams have all joined the Amazon Ads band-wagon, as it seems to be a major channel for shopping already, but to our surprise, only a relatively small proportion of the teams were using Amazon.

media budget on amazon
As a follow up to this research, we collected some more data in Q1 of 2019 among the participating teams, and discovered some good reasons for the low penetration of Amazon Ads among them. The more often, the most important barrier was “budget availability/willingness”. It sounds like the market has not yet woken up to the reality that we can read in the figures presented above: Amazon Ads has already become a significant player and not just an add-on. Your CMO not convinced? Show him this article!

I call that “opportunity” as there may be some first-mover advantages lying there still.

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We knew there would also be some challenges in working with Amazon and in using the ad interface which has not had the benefit of the 15 years’ experience with PPC of its contenders. These came up in the survey together with a more surprising argument: “Not available in my country”.

Looking into the geographical distribution of Amazon revenue, I found this 2017 recap of the Amazon business model from Gennaro Cuofano. It provides an overview of the geographical distribution of Amazon revenue: US 68%, Germany 10%, Japan 7%, UK 6%, Rest of World 10%. No other individual market seems to represent more than 5% of their revenue. Despite the rapid change in Amazon, the geographical distribution didn’t change significantly from 2016 to 2017 so assuming there hasn’t been a landslide, the comparison with worldwide ecommerce distribution is quite telling:
geographic amazon revenues
Let’s compare this with ecommerce revenue distribution in the world. Very different world-view emerges as seen below. Even if we were to exclude China which may not be their biggest priority due to strong competition there, about half of the world does not seem to exist on Amazon’s world-map.
Global ecommerce revenueSource.

There are many reasons why Amazon is likely to represent an important opportunity for retailers in coming years. Their domination of the end of the checkout funnel, their strong focus on efficiency and customer satisfaction, their remaining growth potential internationally.

Is this a déja vu?

Interestingly, the trend Amazon Ads are part of – the trend by which “shopping” eats into “search” budgets – is very similar to the progression that was originally observed in the late 90’s, when paid search would eat into other advertising budgets, and even similar to digital advertising eating into overall ad budgets. We are convinced that this is primarily down to metrics. There is nothing like proven ROI to absorb budget, and the closer you are positioned to the final sale, the more convincing your ad metrics will be. You may be able to convince your peers and even your CMO that is worthwhile investing in Awareness and visibility for your brand, but it is always a bit harder to convince your CFO. “Show me the facts”. Digital advertising has been carried by “proven results” for a long time and sometimes that shoots us in the foot, when our data is not complete.

It is important to keep a degree of Data Skepticism when confronted with the data. Did we include all the data dimensions necessary to fully understand the user behaviour? Did we include offline behaviour? Did we include data from other walled gardens? Probably not all the time. Have you ever compared advertiser platform click-out figures with arrival data on your website? Have you ever looked into who the individuals that “like” your social media advertising really are? Do you know what hides behind “direct traffic” in the default settings of your analytics reports? Find the answers to those three questions and you will start to become a data-sceptic like me.

It is important to keep a degree of Data Skepticism when confronted with the data. Did we include all the data dimensions necessary to fully understand the user behaviour? Did we include offline behaviour? Did we include data from other… Click To Tweet

But despite of this rise being anchored in metrics, there is also an element of user behaviour or rather the user experience. A very simple but powerful illustration of this is the product photo. There were never any images in paid search and now we have all these beautiful product photos popping up directly on the Search Engine Results page (SERP) in Google. As we know, images attract attention more than text and these ad results are likely to have higher click-through rates than text-only ads. There have additionally been multiple iterative changes in the prominence of shopping results in the SERPs and this improvement in the user experience has driven the shift also.

With shopping search, you get colourful pictures and an increasingly smooth buying experience. In that aspect, Amazon has become a leader.

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    The search & shopping strategy

    With user behaviour on the move and a larger scope of tools and inventories available to the digital marketer, a new breed of strategy has emerged. One in which the focus is entirely on optimizing the bottom of the funnel across search, Google Shopping and Amazon Ads. This is of course particularly well suited to retailers and merchants with a large product portfolio.

    The more advanced search and shopping strategies will segment the products in order to identify profitability per product range and include stock level considerations. Some approaches will work on varying the product price instead of the advertising bid, as cheaper products get an algorithmic boost. Other strategies will aim to isolate top performers in individual groups and target them to the highest-performing keyword. In Amazon Ads, where the algorithm is different, the most advanced strategies have taken advantage of the placement of ads in the right categories.
    paid search Rue du CommerceIn the Search Strategies Report, we have included an award-winning case study from a French online retailer named Rue du Commerce, part of the Carrefour group. Together with their agency, Keyade, they embarked on an ambitious Search & Shopping strategy whereby they completely transformed their way of working. They segmented their product feed, automated bid strategies and built Dynamic Search Ads (DSA) on top of them to achieve improved performance for their search campaign.

    For a pure player such as Rue du Commerce, efficiently managing paid acquisition is crucial for the business. In the French market, Google is predominant and what works for retail is shopping. At Rue du Commerce, 97% of the ads were shopping ads and therefore based on the product description. With a catalogue of 6.4 million products, the sheer scale of data management presented a challenge.

    To bring granularity to the catalogue they identified 50 business units from among all the products. These were managed with automated tools following five different profitability strategies. Automated tools can provide strong management support, but they rely solely on machine learning and cannot take exogenous factors into account. This was addressed by adding specific labels to the products thus enabling the identification of high-priority products on top of the five automated profitability strategies.

    The traditional Google ads were addressed in an innovative way by team, by using a custom connector between Dynamic Search Ads (DSA) and the product feed. With this approach, DSA could generate custom ads based on a segmented feed, with priority products already defined.

    This whole strategy enabled a switch of paradigms for Rue du Commerce: instead of pursuing a performance goal set at the global level, they adopted a granular management strategy based on each products’ profitability at a given time. And by optimizing text ads on the basis of the product feed, these generated 5-10% more traffic and generated a 12% higher ecommerce conversion rate.
    Rue du Commerce and Keyade won the French search award, “Grand Prix du Search” end 2018 for this case study.

    Search & shopping rocks 2019

    Search and Shopping work in fundamentally different ways.

    Paid search is based on the keyword — or perhaps we should say “was” based on the keyword as audiences and machine learning-based solutions like DSA have their intake. In any case, Shopping campaigns are very much based on the product rather than the keyword, and the way each product is presented in the data feed. The skills set necessary to optimize a product feed is not necessarily the same as the one required for paid search, but as we have seen, leading agencies cover a broad range of services and shopping is high on the list. And it should be, as it is essential and can represent significant growth, especially for retailers. With Amazon entering the digital advertising scene, we will see yet another battle among internet giants unfold. And as they enter into their competitors’ space, we have Google announce that they too wish to take the battle to another field, namely the marketplace which they are migrating their shopping solution towards.

    Shopping campaigns are very much based on the product rather than the keyword, and the way each product is presented in the data feed. Click To Tweet

    Calibrating search and shopping for optimal results is a challenging exercise, which in many cases will require a dedicated strategy like it was the case for Rue du Commerce in France. The calibration takes place in various areas, firstly within the product feed. Often, a product feed will be void of profitability and margin data as no retailer wishes to share that information widely. Secondly, there is a balance to strike between text ads and product ads as they may not be optimized in the same manner. Giving priority to the product feed and letting the text ads be secondary and letting machine learning-tools like DSA manage some of them was a big step into this type of strategy. Thirdly, optimizing in Googleland and discovering Amazonia will be a key task to win at the Search & Shopping game in 2019!

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