Google's new shopping ads appear to be a big success, and they may be forcing retailers like Walmart and Amazon to spend more in the online shopping wars, at least according to data collected by Brian Pitz and his team of analysts at Jefferies Research.
The number of Amazon-owned brands' shopping ads running on Google has nearly tripled in the past 6 months, and Amazon brands have doubled their market share, Jefferies says.
Amazon says Amazon itself hasn't bought any of the new-format ads, and Jefferies has clarified that its analysis includes ads placed by Amazon's subsidiaries. In a message to Business Insider, the Jefferies team said the ads it attributes to "Amazon" include ads from Zappos, Diapers.com, Wag.com Soap.com, and BeautyBar.com.
This apparent change in behavior comes after 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.
Google introduced the new paid format last year. 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, in this graphic Jefferies produced in the summer of 2013:
Any online retailer can buy them. When used correctly, they display retailers 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's search results were pushed down to less visible areas of Google's pages, Jefferies' notes say. 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.
Back in the summer, Business Insider argued that the PLA ads were a huge threat to Amazon because they moved Amazon's normally very good search results down the page in favor of any retailer who paid to appear above them.
Fast-forward to November — the crucial post-Thanksgiving/pre-Xmas holiday shopping period — and Amazon brands were the No. 7 user of PLAs, Jefferies' most recent note says. In the sample, Amazon had 5,232 ads, about 2% of all PLA inventory:
It's not clear whether eBay, Amazon, and the other retailers here are buying Google's PLAs because Google has pushed down their organic search results (thus forcing them to) or because they find the new ads effective. Either way, they're buying a lot more of them than they used to. Jefferies believes these ads 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 in the sample now lead to a PLA:
Clarification: The original version of this story did not include comments from Amazon, or Jefferies response to Amazon's criticism.
Disclosure: The author owns Google stock.
