Google’s showcased shopping found to come at a premium; Five out of every six items in the panels shown on a Google search made in America are more expensive than the same items from other merchants hidden deeper in the index

November 24, 2013 8:01 pm

Google’s showcased shopping found to come at a premium

By Richard Waters in San Francisco

Anyone in the US doing their holiday shopping from the product showcases that appear at the top of Google’s search results is almost certain to pay substantially more than if they delved deeper in the search engine. Five out of every six items in the panels shown on a Google search made in America are more expensive than the same items from other merchants hidden deeper in the index, with an average premium of 34 per cent, according to a Financial Times analysis.The scale of the apparent premium pricing drew complaints from some Google critics, who said it echoedissues that are at the heart of an antitrust case in Brussels

in which the company has already reached a tentative settlement with European regulators.

By showing its chosen product listings prominently while relegating other services, Google could make more money from merchants who paid to have their products featured, said Gary Reback, a Silicon Valley lawyer who represents a number of the search engine’s rivals.

Google countered that the price paid by consumers was only one consideration in how it selected items to appear in the panels. “Just as people consider multiple factors when they shop, like free shipping or whether they prefer a particular retailer, there are a variety of factors” at work, it said.

Critics claim that many consumers do not realise the product listings are advertising rather than Google’s selection of the best products to buy. Unlike other panes that show advertising on the search engine, the panels are not tinted a different colour and are labelled “sponsored” rather than “ads”.

“Fundamentally it’s not clear to people it’s an ad,” said John Simpson, director of the privacy project at Consumer Watchdog, a Google critic.

The online retailer Amazon also offers some merchants an edge over rivals, But, unlike Google, it says they cannot pay for a privileged position.

Google’s panels first appeared in the US in 2012 and have started to appear in other countries this year. The FT’s analysis took in products listed on the more developed US service.

A search for “digital camera”, for instance, returns pictures of a number of gadgets, along with prices and merchants’ names. If a user clicks on an ad – resulting in a payment to Google – they are taken to the merchant’s page where they can buy the product. Yet a search in Google Shopping, an alternative service, always turns up the same product for a significantly lower price.

The prominence of the product showcase has made it a big money-spinner for Google, with Wall Street expecting it to be an important contributor to profits in the final months of this year.

Since consumers are drawn to the pictures and more likely to buy, “the conversion rates seem to be much higher than they are for a basic search text ad”, said Mark Mahaney, an analyst at RBC Capital Markets. As a result, he added, the product listing ads “will be material to Google this holiday season.” Apparel retailers may already get more than 10 per cent of their sales from the ads, according to RBC research.

An analysis of 25 items chosen at random, from electronic gadgets to toys and household items, revealed that all but three could be found for a lower price through a search in Google Shopping.

For items with higher prices, the items showcased at the top of search results were more than 10 per cent more expensive in three-quarters of the cases. Two items – an $89.99 Bluetooth headset made by Plantronics from online retailer CDW and a $20.68 children’s craft kit sold by Walmart – were more than twice the price of the same goods being sold by other merchants.