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4 Ways to Prepare for Google's Paid Inclusion Hybrid

  |  June 22, 2012   |  Comments

And why a transition to paid inclusion was a good idea for Google and is also potentially good for shoppers.

Paid inclusion used to be considered inherently evil by many within the SEO and SEM (PPC) community and Google hated it. Earlier versions of paid inclusion could be gamed by merchants, businesses, or publishers looking to gain an unfair advantage. If your tenure in the industry doesn't go back to the days of Inktomi and the Yahoo paid inclusion program, a quick search on your favorite search engine and you'll have plenty of fodder to stimulate the neurons.

If you missed the announcements, Google announced the move to a bidded paid inclusion model and simultaneously rolled the Google Trusted Stores program out of beta and into full release. If you run an e-commerce site, these announcements are of great import and may have a material impact on your budget and budget allocation. Google's announcement clarified that: "Ranking in Google Shopping, when the full transition is complete this fall, will be based on a combination of relevance and bid price--just like Product Listing Ads today. This will give merchants greater control over where their products appear on Google Shopping." I don't think that we'll only see paid inclusion or bidded paid inclusion (which is really more of a paid placement model) in the e-commerce category alone. Reports are abundant that similar programs are in various stages of release in the travel and financial services categories.

While in the early days, Google cited lots of problems with a paid inclusion model, from a relevancy and economic self-regulatory model basis, paid inclusion makes a ton of sense as a way to fight spam. Fortunately for Google and unfortunately for you as advertisers, this means that you pay more for traffic you used to get for free.

Before we jump into four ways you can prepare for the transition to paid placement/inclusion within Google's shopping results, let's review why a transition to paid inclusion was a good idea for Google and is also potentially good for shoppers.

  • Spam reduction. When there is no barrier to entry for listings, there is no governor on the desire for stores to add feeds. Stores might even create additional brand sites purely to blanket the feeds with every product they can stock, order, or get drop shipped.
  • Relevancy improvements. A store with a better offering, better landing pages, better shipping policies, stronger brand, and better reputation can generally afford to pay more in a paid placement auction, and will also generally have a higher quality score (predicted click-through rate and other quality metrics). That means the more relevant listings will show up higher. Consumers/searchers love that.
  • Revenue. Google loves it when revenue accompanies relevance improvements and spam reduction, and why not…

The downside for advertisers and consumers from a move to 100 percent paid inclusion for shopping feeds is that advertisers may no longer be able to afford to include products with very low price points, because when they are paying on a CPC, the math may not justify even a bid as low as one cent (I was unable to get clarification on the bid minimums Google plans to implement for this program in time for the column). Even if the CPC bid for "cotton balls" within the Google Shopping product starts at one penny, I'm not sure the merchants will opt to bid when they have a $2 product.

If you do sell products locally or purely online, there are some steps you can take linking at your historical data and the data between now and the full rollout to paid shopping clicks to improve your chances of a successful transition.

  1. Know your high converting items. The higher the clicks (specifically from a Google Shopping result) convert, the more likely you are to be able to afford those clicks and therefore keep your bids and links live.
  2. Know your high profit and high dollar contribution (revenue and profit) items. Beyond conversion rate, you need to understand the higher margin items, not from a percentage margin basis, but a dollar contribution margin. If you have expensive items, a low percentage margin may still allow for a reasonable CPC bid. The lower the price on your items, the higher margin you need to bid (all other things equal).
  3. Know your loss leader and gateway items. Some e-commerce clients of mine have dramatically different average numbers of items in the shopping cart. Similarly, when I shop at some online stores I often have more items in my cart. You, the advertiser, need to understand if you have "gateway" or loss leader items that are highly likely to result in other purchases.
  4. Evaluate the LTV and reorder rate based on items or categories of items. Are some products predictive of long-term customers? Obviously you can bid more if getting the customer means an annuity revenue stream.

I hope you've been doing similar levels of analysis (if not more so) on your PPC keywords. Take those same best practices and apply them to your feeds.

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ABOUT THE AUTHOR

Kevin Lee

Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.

Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.

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