EcommerceBytes-Update, Number 226 - November 02, 2008 - ISSN 1528-6703     2 of 7

Ecommerce 3.0: Extending the Marketplace with Google ProductAds

By Ina & David Steiner

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Google is quietly laying the foundation for a strong ecommerce offering. But Google being Google, it won't be a typical marketplace. Instead of setting up a core site, where people will go to transact business, Google is poised to bring the marketplace to all corners of the Internet.

The following is a thought-piece on how Google might use its search and advertising assets to change the face of ecommerce, doing for product listings what it did for advertising. This is a view of what Ecommerce 3.0 might look like.

Preamble
What sparked this epiphany, of sorts, was a recent conversation with a collector, and long-time eBay seller. He related how much business he was seeing transacted within the forums of niche collectibles sites. A member will post a desirable item for sale and more often than not, an offer would be made and the deal is completed within the confines of the forum. Conversely, a collector might post a message about an item they are looking for. Because of the targeted nature of the community, more likely than not, someone would come up with the item, and the deal is finalized between the two parties.

We checked with several hard-core collectors, who confirmed that collectors were buying and selling from each other on niche sites' classifieds and collectors forums, whereas 4 or 5 years ago, the items would likely have been listed on eBay.

This type of ecommerce activity typically happens "off the radar," since the offers are posted informally on forums or classifieds of micro sites, and buyers are sending payment through various methods, including cash, check, or money order.

Why Not eBay?
In June 2007, the theme of eBay's Developer's Conference was, "eBay Anywhere." eBay encouraged its affiliates to figure out ways to display eBay listings all over the Internet (such as blogs and Facebook) and across platforms (including mobile devices and on users' desktop through tools like San Dimas). This was a 180-degree shift from how eBay had protected its proprietary marketplace in the past, when it did not even allow search engines to display its listings side-by-side listings from other marketplaces. Yet one year later, former eBay product managers criticized eBay for failing to take the marketplace out to the Web and to social networking sites. In August, Rogelio Choy blogged about this in a post called, "eBay - Look beyond the .com":

The fortunate/unfortunate truth is that the radical shift in Internet usage, especially with teens and young adults, will continue to erode traffic at former leading mass-market Commerce or content sites like eBay. Simply put, the Internet is becoming WAY social and web-service oriented. If an online site or service is not heavily invested in both, the future is dire.

A Forbes article relates the problem more bluntly:

The quirkiness eBay brought to the Web eventually moved elsewhere. Laurence Toney was running eBay's collectibles category in 2005 and tried to push through a plan to let fans of collectibles display their stuff free of charge on eBay and then chat and post comments. "It would make eBay more sticky, make it a place where people could hang out," he says. But his idea didn't pass eBay's stiff test: instant, measurable profits. "Only ideas with obvious returns get resources," says Toney. He soon saw hobbyists shift their activities to MySpace and Facebook. He ended up doing a deal with online shopping site Kaboodle and had to pull it off with no engineers.

eBay sellers are not passively waiting for eBay management to "get it." They are listing on multiple sites in addition to eBay, and they are using blogs and social networking sites to proactively create a presence where buyers are engaged. But many of eBay's collectibles and antiques members already belong to tight-knit communities and feel a high level of trust with each other when transacting business.

This type of informal ecommerce does not go unnoticed by companies who are anxious to aggregate this economy for its potential revenue. WorthPoint is an example of a company that is attempting to build an ecommerce site for collectors from the community up. Other social networking sites for collectors, like iTaggit, have sprung up, trying to capitalize on this revenue stream, which is a by-product of community interaction. But will members uproot from their already-established niche communities and add one more site to their "favorites list," or are they comfortable trading within their own circle?

Many frustrated eBay sellers have urgently called for Google to create an online auction marketplace, which we see as unlikely. But with the tools they already offer, and simply connecting the dots, Google could extend the reach of ecommerce in bold and innovative ways - and not only in the area of antiques and collectibles.

Google ProductAds - the Building Blocks
The flash of insight into what Ecommerce 3.0 might look like came to us when we thought about what would happen if Google took Product Search, which aggregates individual merchants' product listings, and put them on publishers' websites the same way it does with Google AdWords. In other words, a Google AdWords/AdSense for ecommerce listings via Google Product Search. We are calling this hypothetical service Google ProductAds.

We had been discussing Google internally quite a bit because it continues to refine its ecommerce "platform," now offering a multi-item shopping cart and adding Shipping and Tax information to Google Product Search listings. But it was when our collector friend observed that there was a lot of ecommerce taking place directly between buyer and seller in forums and classifieds listings on niche collectibles sites that we saw the potential for a Google ProductAds offering.

There are several components necessary for the type of offering we envision, which Google already has in place:

  • Merchant product listings along with the ability to display them based on relevancy (Google Product Search).
  • Multi-item shopping cart and the Google Checkout payment-processing service.
  • Existing relationships with a vast network of websites of all sizes (publishers who run Google AdSense on their sites), and the ability to classify those sites - and their content - according to subject.

To understand our vision of Google ProductAds, one must be familiar with Google Product Search and Google AdSense/AdWords and how strong Google's algorithm is for recognizing relevant content and serving up appropriate advertising to a targeted audience.

Google Relevance
The reason the Google AdWords advertising program works is because Google is so good at serving up relevant ads on websites all across the Internet. For instance, Google is able to dynamically serve up ads that link to websites offering dog-training videos on this blog about Beagles.

Imagine if the blogger also displayed Google ProductAds where visitors could click on individual product listings and purchase items through Google Checkout. And imagine how happy merchants would be knowing they are getting sales from people they might never have reached through mainstream marketplaces.

The model also works well within collector forums, which tend to be very specific, especially as you drill down into individual threads. This is the type of content that drives very targeted Google ads in the AdWords program.

Google Product Search
Google Product Search is Google's shopping search product. Users can access it through the main Product Search page, and users can also find product listings when searching directly on Google.com.

Sellers can submit their product listings for free, and those products then appear when shoppers type in relevant search terms. The feed can be submitted via Google Base, Store Connector or Google's API, and it includes the product title, description, attributes, price, shipping, tax and photo.

Currently merchants can upload listings from any marketplace, storefront or website, including eBay, Yahoo, eCrater, Bonanzle, etc. A shopper who clicks through to a Google Product Search listing is taken to the marketplace or storefront where the listing was created in order to complete a transaction. There, they may have a choice of paying either the seller or the marketplace via Google Checkout, PayPal, credit card, or whichever payment method the seller and/or marketplace chooses to offer. Google makes no revenue from Product Search - yet - either from merchant or the marketplace.

Google AdWords Advertising Program
With Google's ad network, Google brings advertisers (through the AdWords program) together with website publishers (through the AdSense program). Advertisers can choose to run contextual ads on any participating website, or they can run site-targeted ads.

Google AdSense is the flip side of AdWords - publishers join the program and allow Google ads to be placed on their websites.

The AdWords advertiser pays Google when someone clicks on their ad, which compensates the AdSense website operator (publisher) on a Pay Per Click basis.

Google ProductAds
This hypotethical service, Google ProductAds, would offer merchants a way to have their Product Search listings appear on websites that participate in the program. These sites would be third-party, non-marketplace sites, such as blogs, newsletters, niche collectibles content sites and hobby/fan sites.

Just as advertisers on AdWords do, merchants could choose whether to have their listings appear on a contextual basis or on a pre-selected network of sites (or whether to participate in Google ProductAds at all). Google would have to create some new fields in the Google Base feeds for merchants to indicate which, if any, products they would want to display on the ProductAd network. In order to participate in the program, the merchant would have to first sign up for a ProductAds account and agree to terms of service and would also have to have a Google Checkout account.

Website operators who choose to participate would enable Google ProductAds to be displayed on their sites, just as they do for the Google AdSense program. But rather than pay-per-click, they would be compensated on a commission basis when a visitor to their website purchased a product through ProductAds.

When a sale is made, the seller would receive the money in their Google Checkout account, less Google Checkout processing fees, a fee to Google, and the commission fee to the website where the transaction was initiated.

While the free Product Search listings on Google.com search results pages would continue to link to marketplaces, we envision that the transactions made through the paid ProductAds program would take place via Google Checkout, not on a third-party marketplace (nor on the merchant's own site). This way, Google would know whether a sale was consummated.

Google ProductAds "Classifieds"
We also envision Google allowing sites to place a version of Google Product Search on their own website, acting as a classifieds ad directory. It would display relevant ads: on a site for comic book collectors, for example, it might display a page like this within the website's own branding:

The page would also offer members of the site the ability to create their own Google ProductAd listing; on a comic-books website, a collector could create a listing to sell one of his or her comic books. Not only would the ad be seen on that comic-books site, but the seller could choose greater visibility across all comic book sites participating in the program (as well as in Google Product Search results on Google.com if the seller so chose).

The seller would not pay Google or the publisher sites for the listing, but when a sale was made, the seller would pay the Google Checkout payment-processing fees, a Google ProductAds fee, and a commission to whichever site on which the item happened to sell. The commissions could be a strong incentive for site owners to implement this program within their communities.

The Future of Google Product Search
Google continues to invest in Product Search, despite the fact the program generates no revenue. Recently Google asked merchants to add shipping and tax information to their product feeds so it could display this information to shoppers. If Google is to complete the transaction through Google Checkout instead of on a marketplace or merchant website, it's essential to know shipping and tax costs for individual listings.

With Google's announcement that Doubleclick would be integrated with Google AdSense, Google strengthens one of AdSense's weaknesses - that of displaying visually compelling content in an advertising format. The addition of this capability is perfect for showcasing content - including product listings.

Doubleclick is also known for its behavioral targeting techniques - it may deduce your gender, geographic location and other information about you based on your Internet surfing activity. With Google ProductAds, the following scenario is possible: you visit a content site about shoes, and you are shown ads of shoes for sale - and with Doubleclick, Google might know whether to serve up listings for men's shoes or women's shoes.

Will we see Google ProductAds in the near future? Google is adept at keeping people guessing about their direction. However, we're confident that as Google continues to beef up its ecommerce capabilities, it will be perfectly poised to use its skills in bringing advertisers and consumers together and apply those skills to bringing merchants and consumers together. What's compelling about this model is that, instead of attempting to drive ecommerce to a single core site, Google instead will be taking ecommerce and integrating it into already-vital online communities and content sites. Like VISA, it truly will be "everywhere you want to be."

Let us know what you think in the AuctionBytes Blog.


About the author:

Ina and David Steiner are publishers of EcommerceBytes.com and have been writing about ecommerce since 1999.


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