Buy on Google Goes Commission-Free
In an unexpected announcement last month, Google revealed that its ‘Buy on Google’ (BoG) program, which lets retail customers purchase products from participating vendors on the Shopping tab without ever leaving the Google platform, will be moving away from its previously established commission-based model. With that, let us dive in!
Buy on Google has an interesting origin story so buckle up for a quick history lesson. BoG’s roots lie in the now-defunct Google Express platform, which started back in 2013 with the intention of being a direct marketplace competitor to Amazon. Express operated on a commission model, taking a cut of all sales made through the platform at various rates depending on the type of product sold. Express’s biggest struggles always seemed to be 1) visibility to consumers and 2) adoption of the platform by retailers, both of which are major hurdles when competing with Amazon (and Walmart and Target for that matter).
Google is best-in-class at A LOT of things, but as it stands, the company is still taking licks in the ever-present marketplace battle. Regardless, the commission-free announcement is evidence that Google is still interested in creating a viable marketplace.
So, with renewed focus over the years, Google has chipped away at the two problems outlined above with the goal of positioning itself as not just a traffic controller directing customers to purchases, but as a destination for shopping itself. Google took advantage of the popularity of its PLA ad format and leveraged it to encourage on-platform purchases through its ‘Purchases on Google’ and ‘Shopping Actions’ programs, which placed special tags on ads from retailers who could handle transactions on Google.
Image Credit: Search Engine Land
‘Shopping Actions’ even provided subsidized PLA advertising since Google got its cut via commission. On the seller side, Google made improvements to the integration and onboarding processes, customer support, reporting, and more. That brings us to the last few months.
The global pandemic has undoubtedly influenced how consumers purchase goods and what entity they purchase those goods from. Google quickly realized this trend and made a series of improvements to its shopping platform to remove any barriers to entry for businesses, particularly small ones. Back in April, it was announced that placements in the search results of the Shopping tab would now consist of primarily free listings. Retailers just need to submit a product feed to the Google Merchant Center.
More recently, it was reported that free results would show in product knowledge panels on the main SERP. These changes set the stage for the commission-free unveiling, which can be seen as a continuation of this push.
As I said before, Google is making BoG a commission-free service, but there were a few other important details mentioned as well:
Google is opening up its BoG platform to digital commerce provider Shopify for inventory and order management as well as payment processing (along with Paypal) to start. It remains to be seen if other commerce platforms will be joining forces, but I assume that’s the case.
Commonly used product feed formats, including the format used for Amazon feeds, will now be accepted in Merchant Center. Google is also giving merchants access to its expansive product database to extract product information like images or specs instead of having to upload that information for themselves.
In an attempt to meet the rising demand and support small businesses, a new ‘small business’ filter will appear on Google’s Shopping tab to help customers more easily identify those businesses.
Alrighty, now that you have the background and the new details ingrained in your memory, let us turn our attention to the fun stuff – why does any of this matter, and what are the implications and questions to consider?
Google now has a clear competitive advantage over other marketplaces. By eliminating one of the biggest barriers to entry (commission fees), Google gives prospective sellers a de facto reason to pick the big G over the likes of Walmart and Amazon. Though Google still has some hurdles to overcome that will make that commission-free advantage worth it, this new feature is still a real foot in the door to a competition few thought had room for another entrant.
Amazon and others still win out when it comes to shopper recognition, utilization, product storage, and more, but the commission fees (and thus margins) that make selling on other major marketplaces a non-starter for some businesses now becomes a non-factor with Google and maybe enough for sellers to give the platform a shot when they otherwise would not have.
How will Google make this a revenue-driving piece of its business? This was the first question out of my mouth after I read Google’s announcement. In my mind, if there is no direct revenue source for Google, so there has to be another less-obvious play in mind. A few of my educated guesses:
Once sellers get onboarded, they’ll get a taste of the potential of Shopping ads for their business through Google’s free listings and will likely consider using some of the money saved from not having to pay a commission to leverage paid ads to increase their products’ visibility.
Google may bite the proverbial bullet in the short term to increase seller count, and hopefully customer usage. Then, once the marketplace matures a bit more, they can reintroduce some sort of fee structure. It is unlikely that they would be able to charge fees as high as previous commission rates, but there is a chance they could find a middle ground.
My long-shot hypothesis is that Google is continuing to test the waters to understand the demand for another ecommerce ecosystem, similar to what Amazon and Walmart have with distribution, warehousing, etc. I’m not sold on Google jumping wholly into this mix themselves, but would not be too surprised to see them partner with other entities to take care of these other components if they think it is viable. Alternatively, they may already understand that demand, so they might be trying to understand whether or not a marketplace needs those elements to be successful or if one can be done well without them.
My colleague, Garrett Milliken, made the point that this actually might not be about driving revenue at all, but instead about proactively defending against any antitrust accusations in the US, something Google is already navigating (and paying hefty fines for) in the EU. By opening up the Shopping tab to free listings, Google can proactively create an environment similar to what exists in the EU Google Shopping space, but on their terms.
Whatever the game plan may be, I’d be hard-pressed to believe that Google (or any business) would do this purely as a good-faith gesture towards businesses looking to grow their ecommerce programs.
SMBs should strike while the iron is hot. Google has made it a point to say that this change will be beneficial to sellers of all sizes, but the underlying message is clear: Google wants small businesses on its platform and the company seems to be willing to do whatever it takes to make that decision as easy as possible from free ‘Shopping’ listings (plus a dedicated filter) to commission-free selling.
Google’s partnership with Shopify is especially notable as Shopify is a low-end disrupter in the ecommerce world and is the platform of choice for many small and medium-sized businesses that don’t want to build a proprietary platform. It is unclear how long this SMB focus will remain, but given the demand from the public and Google’s willingness to help meet that demand, small businesses should seriously consider giving this program a shot if they think it makes sense for them.
This could be the beginning of a battle over the existing pool 3P sellers. The timing of this announcement, coincidentally, comes shortly after Amazon announced changes to its FBA program, which has left many third-party sellers frustrated and uncertain about the upcoming holiday season. Now, Google’s announcement doesn’t do much to directly solve the woes of those sellers but bubbles up an alternative for those sellers if they’re searching for one.
As I said before, selling on Amazon or Walmart is not an option for many businesses, so if Google manages to capitalize on this fact and truly make some noise as a disrupter by attracting a sizable number of new sellers, then other marketplaces may be forced to reconsider their fee structure or lose out on a subset of valuable contributors to their business. Competition is a beautiful thing.
I’m excited by the potential that comes with Google’s announcement. I’ve watched over the years as the search giant tried to determine how to best position itself in the market when it comes to online shopping destinations and I’m hopeful that this is a step towards solidifying that position, whatever it ends up being. Businesses (especially small businesses) looking to expand their ecommerce footprint have an interesting opportunity in front of them with the potential for higher margins and the chance to leverage the recognition, trust, and traffic that comes with the Google brand.
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At the moment, it’s unclear how Google plans to make this a profitable endeavor, but there seem to be at least a few different opportunities to do so. The fun thing about watching tech giants innovate is that it can appear like they are playing 4D chess while the rest of us are playing checkers. Regardless, this is likely not the last we will hear about this program and odds are, if Google has its way, we will all be taking advantage of it in the years to come. Happy shopping, y’all.
Posted by Sean Adams
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