Google Works With Shopify to Spur Commerce, Retail Ad Spending

(Bloomberg) -- Shopping ads have become a powerful sales spigot for Alphabet Inc.’s Google. So the company is doubling down on them, launching a new tool designed to draw even more spending from e-commerce businesses and drive offline sales.

With the new feature, Google will make it easier for retailers to run ads for consumer products, like sneakers and speakers, on several popular Google services. And marketers will be able to buy these Google ads directly through Shopify Inc., another integration between the two companies that are facing a looming threat from Amazon.com Inc.

Google’s commerce tool is one of four new ad products the search giant introduced Tuesday. Each centers on automating the ad-buying process. The tools are also designed to cement a central marketing portal for all things Google. With the retail feature, for instance, marketers can set certain business goals, such as acquiring new customers or driving foot traffic to stores, then spray ads efficiently on Google search, Maps, YouTube and across the web.

“It’s a one-stop shop,” said Sridhar Ramaswamy, Google’s ads chief. “Setting up multiple campaigns for each of these services is clearly a big burden, and it leads to outcomes like budgeting inefficiency.”

Over the last three years, Google has steadily tied more of its services together for marketers, an attempt to retain its leading position in digital ads as mobile device use has skyrocketed. At the same time, the company, which raked in $95.4 billion in ad sales last year, has infused more of its machine learning prowess into its business.

The suite of tools released on Tuesday do both -- opening up more Google products to ads while incorporating the company’s machine learning, which can automatically crunch and match reams of data about users and ads.

One tool is a broad overhaul of Google’s cash cow. The feature, called responsive search ads, lets advertisers submit their pitch to consumers with more words and a wide variety of different headlines (as many as 15, up from one they can now submit). They upload the ads, then hand the keys over to Google, which selects the best words to use based on search terms people use and a wealth of other personal data about its logged-in users.

In early tests, the tool drove down the price of ads and increased the number of ads people clicked on, said Jessie Dearien, head of paid search for digital media firm iProspect.

“Because it’s a more relevant ad, we’re seeing it be more effective,” she said. In a blog post, Google said the feature is coming in the “next several months.”

The company has faced criticism from rivals and regulators about its dominance in the market. The European Union has an open antitrust probe into Google’s ads business, in addition to a charge against Google’s shopping ad service that prompted some changes by the company in the region. Ramaswamy said the new e-commerce tool will not work any differently in Europe.

Investors will be watching to see if the new tools can help Google maintain its reliable growth in ad sales and ward off rising competition from Amazon. Google’s recent deals with retailers such as Walmart Inc. and Carrefour SA are intent on matching Amazon’s sprawling purview of retail habits and operations. On Tuesday, Google also introduced an ad format expressly designed for retailers to drive foot traffic to stores. The company paid for access to millions of consumers’ credit-card data to better connect online ads to brick-and-mortar purchases. The industry will buy $23.5 billion in digital ads this year -- more than 20 percent of the total U.S. spending, according to analyst EMarketer.

Shopify helps companies set up e-commerce websites, driving businesses to buy Google shopping ads. Ramaswamy declined to discuss the revenue terms of the partnership. “It’s one of those relationships that’s really mutually beneficial,” he said. Google’s cloud unit signed up Shopify as a customer in March. Ramaswamy said he expects to add more e-commerce partners to its ad-buying feature soon.

Google would also welcome Amazon to use its new marketing tools. Earlier this year, Bloomberg News reported that Amazon stopped buying certain Google shopping ads. That boycott ended, according to Google’s ad boss. “They’ve definitely returned,” Ramaswamy said, declining to share more details.

©2018 Bloomberg L.P.