December 19, 2001 4:00 AM PST

Google sees profit in product images

Google is testing a feature that lets consumers browse the pages of mail-order catalogs, a departure from its core search business that signals a major move into commercial listings.

The beta service is currently free to catalog companies such as L.L. Bean, Pottery Barn and Lands' End, but Google is developing programs "to boost catalog sales," according to its Web site. Those for-fee services may include shopping-search analysis, advertising placement and direct linking to online retailers' checkout counters.

If the test evolves into a commercial service, it would set Google on a new course. The company has long cast itself as an incorruptible search service in an increasingly profit-driven business--an image that helped it win a die-hard grassroots following. But that picture becomes less convincing each time it expands into new arenas in search of dollars.

"This is a new direction for Google; they are clearly looking to get new revenues," said Rob Lancaster, Internet analyst at The Yankee Group.

The company has added new search features before, including newsgroup archives and image searching. Building a separate, mall-like search engine for catalogs would be among its most overt grabs for revenue and could touch off turf wars with well-established e-commerce players such as Amazon.com, Yahoo Shopping and others.

If adopted, such a step would thrust Google deeply into the world of commercial search--a place the company has long thumbed its nose at. As the advertising market soured, nearly every major search provider, including top portals America Online, MSN and Yahoo, have adopted some form of paid inclusion service to their databases. For example, Yahoo, one of the last holdouts in relatively commercial-free search results, recently announced a deal with Overture Services through spring 2002, when it will launch its own for-fee listing service.

Google does not sell placement in its search database. But it does sell space on search results pages tied to keywords used in the search bar. The ads sit at the top and right-hand side of results pages and are clearly marked as sponsorships. A new catalog search, like its image and newsgroup searches, would mostly likely be separated from its standard search pages.

"What you might see in this roll out is Google starting to do what others have done in paid inclusion," said Danny Sullivan, editor of industry newsletter Search Engine Watch.

Still, a Jupiter Media Metrix report from March 2001 found that 28 percent of people looking for products are likely to type the product name into a search engine's search box--far more than the 5 percent who browse a shopping channel or the 4 percent who click on an ad.

Turning a new page
Mountain View, Calif.-based Google launched the beta of its catalog search last Thursday after developing it for nearly three months, a move first reported by MSNBC.com. Google Catalogs has more than 1,500 catalogs from hundreds of retailers in the directory. Shoppers can search for products ranging from toys and electronics to apparel, calling up print-catalog images the size of Post-It notes. By clicking an image, consumers can view full pages from the retailer's catalog and browse page by page or by typing in a page number.

"We see it as an opportunity to maximize (retailers') outreach and improve search for our consumers. For people who don't have a subscription to L.L. Bean's catalog, they can search its products online," said Google representative Eileen Rodriguez.

Through the new service, the company plans to sell retailers research on shopper habits. According to its Web site, Google can help retailers understand how consumers use their catalogs by reporting the most common words used to find a catalog, how many pages searchers examine, and the sell-through rates of online catalogs.

In addition, Google said it is developing advertising programs "to enhance (retailers') visibility within the Google Catalog Search pages." It also said it will sell retailers the names and addresses of Google users who request a specific catalog in the mail.

Perhaps most importantly, the company suggested selling links to product pages on retailers' Web sites. For example, a consumer who pulls up a broom advertised in Target's catalog could click on a link to the company's online checkout aisle.

"Although we are talking to a number of catalog publishers, we have not announced formal relationships of any kind," Rodriguez said.

Catalogers such as Lands' End have yet to fully investigate the program. Lands' End spokeswoman Andrea Stephenson said her company is in a limited advertising partnership with Google and is reviewing the new service.

"We're open to looking at anything they have to offer; we're not sure how we're going to move forward yet," she said.

The selling point
Analysts say search provides three major sources of revenues for companies: licensing, advertising and retail partnerships. Companies such as Overture, formerly GoTo.com, proved the revenue potential of selling placement in a search directory in the last couple of years. Inktomi, Google and others have also entered the enterprise market by licensing their search technology to major corporations such as Sony. But retail is one key area of business for portals and search providers.

Yahoo, for example, lets consumers search for products and services in its Yahoo Shopping area; with each purchase from its site, it gets a cut of the retailer's profits. In the third quarter, Yahoo reported revenues of $132 million from global marketing services and commerce, which includes shopping-related profits. It launched the service in November 1998.

AltaVista made a foray into comparison shopping search services through its purchase of Shopping.com, but it closed the service after it proved too costly. AltaVista more recently partnered with comparison-shopping engine DealTime to provide the feature to Web surfers.

DealTime makes money by sending leads to the merchants it's partnered with, including 800.com, REI and Wal-Mart. Its search engine lists the products of about 1,000 merchants; of those companies, 350 are paid relationships, according to the company. DealTime reached cash-flow breakeven in November.

Over the last year, Google has introduced several user-friendly features to its service. It restored the archives of millions of Usenet newsgroup discussions after it purchased the assets from Deja.com earlier in the year. The company also unveiled image search. Google has been testing a tool that offers snapshots of Web pages alongside ordinary search results and a voting system to rank Web pages.

To build the catalog mall, search experts said Google had to scan the catalogs through an optical character recognition program, which would recognize words on the page and turn them into text rather than images. No small task.

"This is completely a brand new thing that they had to develop, begging the question, why would they do this," Search Engine Watch's Sullivan said.

"It does make sense for Google to develop a shopping oriented search service, but it's odd that it started with mail-order catalogs rather than online merchants. They might suspect it's an easier, more lucrative route to go."

 

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