Google to Show ‘Product Ads’ (Local Inventory?)

Google is testing a new type of “product ad” that will appear in Google.com results. Here’s an overview from the WSJ, Google Blogoscoped and SEL. As the Journal describes them:

Unlike text ads, product ads will “feature product specific information directly in the ad such as price and product image,” according to the email Google sent some advertisers inviting them to try out the ads this week. Google said that it would continue to work on the most effective format for the ads and that the ads would “complement standard text ads on Google.com” . . .

With the new ads, Google is mixing up its pricing model as well. Unlike Google’s standard search ads, where advertisers generally pay every time users click on their ads, Google will charge advertisers for product ads only when a user makes a purchase. Advertisers set the commission they are willing to pay, and Google decides which products ads to display based on the commission, how well the ad matches a query, and how often people click on the ads, among other things.

The pricing then is CPA (based on a purchase or perhaps other definition of “conversion”) and the submission process involves Google Base. In the same way that Android Market’s requirement that consumers use Google Checkout to buy paid apps, this program potentially gives new vitality to a service that has underperformed for Google: Google Base.

Google has experimented with display, video and product images in ads in Google.com search results in the past. So this isn’t as much of a departure as it might appear out of context. The CPA pricing is interesting and perhaps designed to generate more participation and enthusiasm from e-commerce sellers. (The WSJ speculates that “product ads” are partly a response to Bing and the “cashback” program.)

The question I have is will local inventory data from Krillion, NearbyNow or others be included? If so that would make the CPA billing problematic unless conversions can be defined in more than one way here. But consumers would certainly respond to the program.

As you may recall Google had “local shopping” in Maps early on, allowing users to find products in their area by filtering search results with a check box. The data then came from StepUp and ShopLocal. StepUp is now part of Intuit. The program was discontinued as far as I know. But now with more inventory data available others (e.g., TheFind and YP publishers) are offering it. Google can’t/shouldn’t be far behind.

Here’s some additional information from MediaPost.

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