And So The EU Cracked Down On Google With a Record-Breaking Fine

Is This The Beginning of The End for PLAs?

Why Is Google Being Fined?

Not that you wouldn't know by now - the European Commission has ruled that Google abuses its market dominance by featuring its own Shopping service (highlighted in the image below) at the top of its search results while simultaneously demoting other similar comparison services through changes in its algorithm.

Google search results for square prescription glasses

Not being an expert in European antitrust law, I can't really claim to have an informed opinion on whether the EC is right. What I will try to do is save you some time by collecting the most common arguments for and against the ruling.

In favour of the ruling

  • Google is marking its own homework. The top result on Google typically takes more than a third of the click share and Google has reserved the coveted spot for its own Shopping service. Since pushing these ads to the first page, Google has driven a 45-fold uplift in traffic to Google Shopping in the UK, while other comparison shopping sites have seen their traffic drop by as much as 92%. As The Economist puts it, it might be time to ask questions about how online services should treat competitors on their platforms. Should Google be allowed to make rivals disappear online if it decides, or simply claims, that its offer is better for users?
  • Setting a precedent. This argument kind of stems from the above: following Google's fine, Tech companies will have to think twice before leveraging their power in one market to gain an unfair advantage in others. The decision is expected to have a knock-on effect on Google images, News and local listings. Companies such as Getty Images, News Corp, Yelp and Trip.com have signed a letter in support of the EC's decision, which they are hoping will change the rules of the game. For more on this viewpoint, read New Scientist's piece on the matter.

Against the ruling

  • Google Shopping improves user experience. In fact, Google Shopping empowers customers to easily browse offers and sellers, which increases competition. This Search Engine Land post shares further thoughts on how customer experience might suffer if Google is forced to change its Shopping service.
  • Amazon and Ebay enjoy similar dominance. A great deal of comparison shopping traffic never even goes through Google anyway. Users are increasingly turning to other platforms for their shopping. Amazon's rise, far from being prevented by Google Shopping, has taken a toll on most other online retail services. The EC conveniently excludes this competition from its considerations by argueing that Google Shopping is a completely difference service from Amazon because the former leaves user contact in the hands of the seller. According to the EC, Google Shopping's competition should be coming from other price comparison websites (don't ask me who those sites are, I don't know).
  • The EU's hostility towards big tech companies will hinder innovation. There is a certain fear that the risk of rivals demanding compensation will discourage innovation. Marcquarie Research argues on Market Insider that Google is effectively being punished for offering additional functionalities that improve its service.
  • Ads are an essential part of the deal. Google's sucess as a search engine depends on making its ads profitable for advertisers and helpful for customers. Shopping ads provide retailers with a tool to compete against Amazon by putting their products directly in front of users, as briefly mentioned in Google's response to the EC's decision. Unfortunately for the paid search industry, the EC isn't approaching Google Shopping as an ad format but as a discrete service (again, quite convenient).

What Happens Now?

The responsibility of finding a solution falls on Alphabet, but the Commission wants it to give rival comparison shopping services equal treatment in the search results (for more details, read the full Press Release).

Google is considering an appeal against the ruling, but if the decision stands it will face two main options:

  • Give other comparison engines equal visibility on the search results. Oddly enough, a proposal along these lines appears to have been rejected during settlement negotiations in 2014. Personally, I think a compromise of this sort would make the most sense and, now that everyone will have heard about Google Shopping, the customer base might be solid enough for it to stand its ground even if some of its real estate is given away.
  • A tougher alternative would be to scrap Google Shopping altogether (at least, within the EU). This was the fate of Google News in Spain, where a law passed in 2014 requires news aggregators to pay publishers for linking to their content. The difference is, of course, that Google News doesn't directly generate any revenue for Google.

My Account Depends On PLAs. Should I panic?

It seems unlikely that Google will simply give up on product-based ads. PLAs have grown substantially in the past few years and are Google's best chance at tackling competition from Amazon. But while the service itself may not disappear, the antitrust fine marks the dawning of stronger legal and political opposition to Google's control of the market. PPC is an ever changing business, and this reminds us that it is never a good idea to put all your eggs in one basket. If you or your client want to keep expanding your catalogue´s visibility, look beyond Google and start by finding new opportunities through Bing Shopping Ads and Amazon Sponsored Products.