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Google’s Paid Product Listings Direct Consumers to Higher Prices, Reports Say

More reporters and other Google watchers are noting the company’s broken promises and how Google manipulates the display of results to boost its sales to the detriment of consumers. And with the holiday season here, new studies and reports find that consumers may be unwittingly paying more when searching for products on Google’s homepage.

Advertisers pay to list products on Google Shopping, and several of those paid listings appear prominently with a picture, price and name of the merchant on the homepage – above natural (i.e. unpaid) search results that link to other comparison shopping sites. As Google says in this video on the paid listings, “Google’s here to promote your products to shoppers.” So much for Google’s pledge that “placement in search results is never sold to anyone.”

On Dec. 2, the day many consumers scoop up online holiday deals on Cyber Monday, Consumer Watchdog released a study finding that prices for items found in Google Shopping results were higher for 8 of 14 products relative to comparison shopping sites Nextag, Shopzilla and Pricegrabber. The study found prices that were 9 percent to 67 percent higher than listed on the other sites for the same items. John Simpson of Consumer Watchdog summed up the findings:

 “There are great deals to be found online, but Google Shopping doesn’t usually feature those deals. The Internet giant is concerned first about maximizing its profit from retailers, not about saving you money. It all makes sense when you understand that you aren’t Google’s customer. You are Google’s product, being sold to the highest bidder.”

Last week, reports of higher prices for products found in Google’s paid shopping listings gained traction. On Nov. 24, the Financial Times ran a two-part series on how paid inclusion of product listing ads above natural search results impact consumers. In the first story, the FT found that five out of every six items appearing in Google’s product showcase results are more expensive than other results buried deeper in results with an average premium of 34 percent. The FT explained the Google practice:

“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…[this is 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.”

In a second story, the FT reported that shoppers who buy from Google’s paid product listings pay higher prices than found on other sites about 85 percent of the time. The article put the FT’s findings in the context of the European Commission’s investigation of Google:

 “Whether the Google practice is unfair or not is a hotly debated topic, particularly as Europe closes in on a settlement of a four-year-old investigation into the company over practices like this that critics say harm consumers and squash competition.”

Specifically, the FT highlighted critics’ complaints that shopper don’t know they are clicking on ads for products in search results, which benefit merchants more than consumers, and those retailers are then likely to buy more such ads from Google, thereby delivering the search giant higher profits. What’s more, critics say Google is pushing listings for unpaid rival shopping sites far down in the results, making it harder for consumers to find sites with lower-priced goods.

The FT report sparked an intriguing comment from Google Chairman Eric Schmidt, as reported by subscription news service Mlex on November 25: “The advertising industry pays our bills. We do not respond to requests from companies to manipulate our results.”

These stories make clear that Google manipulates the display of shopping results to feature ads that pad its bottom-line, regardless of the additional cost and harm to consumers. Consumer Watchdog put it best: “You can’t trust Google Shopping to show you the best price.”