Google Shopping aka Google Product Search aka Froogle

Google’s commerce marketplace is under attack by Amazon and Facebook causing Google to respond. Google+ and its current experimentation with Product Search – its shopping aggregator vertical – are visible reactions.

Changing the business model and experience of a shopping aggregator site is a dramatic event. I have driven MSN Shopping and Bing’s commerce vertical through several such cycles from paid placement, to free, to pay-per-click, to pay-per-action and from 5 million paid listings to 100 million free and back down to 50 million listings.

The first step is to have deeper relationship with merchants that want to engage with a new listing product. Google has announced that it will transition its catalog from free to paid inclusion. This is a big change since it will reduce the number of merchants in Google’s catalog significantly; kicking out niche product providers and feed aggregators that constitute the backbone of any product catalog’s tail selection.

The next step is to establish a merchant portal that allows managing product data and merchandizing to shopping customers. Google has recently acquired Channel Intelligence a commerce enabler that offers feed generation, optimization, reporting and consulting.

The last step is to introduce a shopping experience that allows merchants to compete for customers by actively controlling how and where their product appears.
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. Over time they will also have the opportunity to market special offers such as “30% off all refracting telescopes.” Google Commerce

Google’s move will alienate small merchants and has the potential to reduce the satisfaction of its customers through reducing selection. There is nothing that undermines confidence of a shopper in an aggregator more than not finding a product in the catalog or finding it on a competitor’s service.

On the other side Google’s move has the ability to greatly enhance the shopping experience and thus to re-vitalize the shopping comparison market, which has become a little stale especially with discount and flash sites stealing the show.