Google Has Discovered A Massive New Revenue Driver - And It's A Huge Threat To Amazon

Google has seen a huge uptake in its new "Product Listing Ads" (PLAs) which compete against Amazon for internet shoppers' clicks, and push Amazon's search results lower down Google's listings.

Expect analysts to grill Google CEO Larry Page about the effect of PLAs on his Q2 2013 earnings call on Thursday.

Nearly 10,000 U.S. advertisers are now using Google PLAs, up 54.7% in June (quarter to quarter), according to a Jefferies research team led by Brian Pitz and Brian Fitzgerald. Those advertisers are running 156,000 ads, up 20.8% from the previous quarter, Jefferies said in a terrific, in-depth note to investors recently.

PLAs are different from Google's usual blue-link text ads, the ones you've seen for years next to search results. PLAs had been free for companies advertising inside Google Shopping. But in September, Google started charging for the ads, which appear as a set of product photos with prices and links on the upper portion of search result pages.

Google's positioning of PLAs pushes Amazon's regular search results further toward the bottom of the page — where no one sees them. Amazon can get its listings inside PLAs, but it has to pay Google to do that.

Thus Google has erected a search roadblock in front of Amazon — and thousands of advertisers are now paying Google to be part of it, Jefferies says.

It gets worse for Amazon: Google may be planning to upgrade PLAs so that people can make purchases in the ad without ever actually arriving at the third-party site, the Jefferies team writes:

We believe Google’s ambition is to evolve these ads to the point where users can purchase the item without ever leaving the search results page.

The analysts believe that PLAs may cannibalize some of Google's regular search business, but that's OK because Google gets higher prices for them.

Here are the top U.S. PLA advertisers, per Jefferies. Note how far down the list Amazon is:

eBay and Walmart aren't stupid: If they're running more PLAs than Amazon, it's because they're getting a good enough ROI to justify that.

And here's what that "roadblock" problem looks like for Amazon visually, per Jefferies:

Amazon now becomes the de facto also-ran in any kind of search.

Disclosure: The author owns Google stock.

Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.