PPC | June 27, 2017
Why the EC Ruling Against Google Could Forever Change Digital Marketing
A landmark case against Google from the European Commission has sent shockwaves through the digital marketing world. Here we look at the case, how it’s going to impact marketers and how the result could shape the future of digital marketing.
The €2.4bn Question – Why Were Google Fined?
The European Commission (EC) has said that Google has abused its power as the dominant search engine and illegally broken antitrust laws by placing Google Shopping at the forefront of relevant search queries.
It’s claimed that this denies other companies the chance to compete and denies users a genuine choice of products.
The EC has reached this decision by collecting evidence through performing intensive analysis that included:
- 2 terabytes of search data that contained over 1.7 billion queries
- Research into the impact of visibility in search results on consumer behaviour and click-through rates
- Research into the commercial importance of visibility in Google’s search results and the impact of being demoted
- An extensive market investigation of customers and competitors in the markets concerned (the Commission addressed questionnaires to several hundred companies).
If Google do not end conduct within 90 days, they will face further fines of 5% of the average daily worldwide turnover of its parent company, Alphabet. This would equate to $14 million per day.
While it’s likely that Google will appeal the decision, it’s possible we will see serious changes within the search engine results pages very soon.
How Does Google Shopping Work?
Like other Google paid advertising options, Google Shopping works on an auction system and bids can be modified with a number of parameters that can include:
- Time of day
- Device (mobile, desktop or tablet)
- Audience data (gender, age, interests etc.)
If a query and the modifiers match what advertisers are willing to bid on, then products are pulled from a website’s product feed (which is managed through the Google Merchant Centre). Product data, images, price and availability are then pulled through into the search engine pages.
These Google Shopping results usually appear at the top or the side of a search engine results page, alongside the other paid search ads.
What This Means for Marketers
Because Google Shopping ads contain images, brand names, ratings and prices, they have become an effective weapon in a digital marketer’s arsenal. They offer nearly everything a customer needs to make a purchase decision and often negate the need to look elsewhere.
According to a 2017 report, there has been a 25% increase YoY in Google Shopping spend and, by the end of 2016, retailers were giving a greater share of their AdWords budgets to shopping ads than text ads.
We’re not yet sure how Google will respond but, with the risk of additional fines, it’s likely that we’ll be seeing changes soon.
The European Commission Decision states:
The Decision orders Google to comply with the simple principle of giving equal treatment to rival comparison shopping services and its own service:
Google has to apply the same processes and methods to position and display rival comparison shopping services in Google’s search results pages as it gives to its own comparison shopping service.
As some of the complaints were based around companies being ‘demoted’ in favour of the Shopping Ads, one possibility is making the ads themselves less prevalent in the search results. This could mean them appearing further down the page underneath the natural results, or maybe ads without images.
Unfortunately for marketers, whatever Google do to respond to the situation is likely to cause a negative impact. With Facebook having direct buy ads and Snapchat adding audience targeting and direct to product page features, it’s possible we’ll see more ad budget shifting to social networks to make up for the loss of shopping ads.
However, we may just have to wait and see what Google come up with.
How Will This Affect the Future?
This is unlikely to be the end of investigations into Google’s dominance. There are already two other cases against them from the European Commission and they themselves have stated:
“The Commission also continues to examine Google’s treatment in its search results of other specialised Google search services. Today’s Decision is a precedent which establishes the framework for the assessment of the legality of this type of conduct.”
The worry for marketers is, where does the European Commission stop? Pay per click (PPC) has become an integral part of business growth for so many companies across a huge range of sectors and industries.
‘Theoretically’ Google has always favoured its own products by putting search ads at the top of a page. It’s certainly no secret that Google has slowly been increasing the amount of space that these ads take up too, which has, in some cases, decreased the amount of organic results on the first page.
If any penalties against search ads do occur, this will mean that companies have to rely more on organic search results. However, this is possibly self-defeating for the European Commission.
Ranking organically takes a substantial amount of time, effort and specialist skills. Whilst it is undoubtedly worth it, some small companies simply won’t be able to take on established brands in organic search without significant budgets.
If used correctly, PPC means that these smaller companies can immediately compete with bigger companies in a much shorter timescale and by spending less money. The European Commission must understand this before they start tearing apart the industry further.