Google Expands Product Ads in Search With New Unit, Google Receives a Cut of the Sale

Google search results are going to start looking more like a catalog, with images of products along with prices and other information on the search page.

An example of a Google Product Ad.

Google had been testing the new ads with 800 advertisers over the past year, but today released its Product Ads feature out of beta. For the first time, major advertisers will be able to automatically have images of their products pulled into search results. Unlike auction-based search keywords, where marketers pay by the click, with Product Ads, they'll only pay if there's a purchase and share revenue with Google.

"This is a new kind of advertising system with Google," Susan Wojcicki, senior VP of Google advertising products, said today at a roundtable event at Google headquarters in Mountain View. With Product Ads -- which show up as photos and several lines of text, including price, alongside search results like traditional AdWords ads -- advertisers only need to provide Google with the product feed and decide on the percentage of revenue share.

Advertisers already provide the feed to Google in order to be featured in product search. Retailers do not need to buy keywords, prepare the text for the ad or decide which items from their inventory to include in their AdWords campaign. "This takes a lot of the labor out of managing a campaign," Ms. Wojcicki said. "We are changing the way the back-end works."

Retailers who have hundreds of thousands -- or millions -- of items in their catalogs may not have time to manage that many keywords or the constant switch of seasonal items.

"A company may only concentrate on 20 percent of their products that drive sales," said Dennis Woodside, VP-Americas operations. "Now, because they provide us their entire product feed, all of their inventory is in circulation."

While retailers are giving up some of control for this particular product, Ms. Wojcicki said that Product Ads are an additional channel for advertising since companies are already using the AdWords keyword model for their search advertising.

As to be expected, Google had some marketers on-hand that had experienced success during the beta test.

Camping equipment retailer Campmor's marketing manager, Nick Scilingo, said the company's click-through rate increased by 260% during the Product Ads beta and increased total clicks to their site by 40%. Campmor has 25,000 items for sale and buys about 3,000 keywords from Google's AdWords program. Mr. Scilingo said that because he only has two people on his marketing team, he likes that he doesn't have to spend time writing text ads and choosing keywords but can rely on Google to automatically choose relevant products from Campmor's merchant center account when someone enters a search related to one of their products.

The CPA format has a few pricing options. Michael Manta, Diapers.com marketing manager, said that he chooses the percentage based on the category of product.

In the near-term, product ads will only be available to marketers with managed accounts on a cost-per-acquisition basis; ultimately, though, self-serve advertisers will have access. Right now, the format won't appear on mobile phones.