Amazon Caves To Google's New Shopping Ads, Which Screwed Amazon Out Of Its Search Results
And it's all because Google introduced a new search product that - a cynic might argue - was deliberately designed to screw Amazon out of its high-ranking organic (unpaid) search results.
Late last year, Google introduced a new paid advertising format. Whenever Google figured you were searching for something shopping-related, say "Ugg Boots," it displayed so-called "product-listing ads" (PLAs) instead of regular text links.
Those links look like this:
Any online retailer can buy them. When used correctly, they display your wares in big, clickable boxes on top of the free organic results. Google's other search ads are off to the side, and are slightly less visible.
Jefferies says PLAs bring in $9 in sales for every $1 they cost.
In the early part of 2013, Amazon appeared to be slow in using the new ad format. Its search results got pushed down to less visible areas of Google's pages. In June, Amazon was only the 11th biggest user of PLAs. It ran 1,752 of them, according to Jefferies' sample of 150,000 searches, and about 1% of all PLAs displayed by Google were for Amazon.
At around that time, Business Insider noted that the ads were a huge threat to Amazon precisely because they moved Amazon's normally very good search results down the page in favor of any retailer who paid to appear above them.
Lo and behold, in November - the crucial post-Thanksgiving/pre-Xmas holiday shopping period - Amazon was the No. 7 user of PLAs, Jefferies says. Amazon ran 5,232 of them in the sample, about 2% of all PLA inventory:
Jefferies believes that Amazon's money - and everyone else's, of course - will boost Google's coffers in Q4:
In the US, the number of Product Listing Advertisements has increased 99% Y/Y to 236K - the most ever. In the UK, the number of PLA ads increased +130% Y/Y since March as we tracked 198K PLAs in our current study - again, the most ever.
... Given our findings, we think Product Listing Ad (PLA) format could drive upside during the important holiday quarter because PLAs generate more revenue for Google compared to the legacy text-based 'blue link' search ads.
Here's what the increase in PLAs on Google looks like over time (below). Nearly 40% of search results now lead to a PLA. That just not something Amazon can ignore, it seems:
Disclosure: The author owns Google stock.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.