For a long time, the digital ecosystem consisted of two distinct worlds: search and commerce. Search companies like Google offered a way for users to find information, and commerce companies sold things users wanted. These were two separate business models with different revenue sources, served by marketers with different skill sets.
Today, the lines between search and commerce are blurring. Search engines are making money from purchase transactions and commerce companies are earning money from advertising. This search-commerce convergence makes sense if you look at things from a consumer’s perspective: Users don’t care about your business model, they just want to find what they are looking for.
Google is invading online commerce
Travel is a good example of how this is playing out. In its role as a traditional search engine, Google has historically monetized travel information with ad revenue to the tune of $12 billion a year. Now they offer direct bookings via Google Flights and Google Hotel Finder, siphoning off revenue from the biggest travel metasearch players and online travel agencies (OTAs) like Expedia and Priceline. Google Flights already serves more travel shoppers than Kayak.
Beyond travel, Google’s Shopping Actions program gives it a cut of transaction revenue when shoppers referred from Google make purchases at Walmart, The Home Depot and other retailers. The search giant has stepped beyond the search model and looks ready to take on the traditional walled gardens of commerce in a big way.
Commerce marketers need to become mini-Googles
The good news for marketers is that convergence works both ways. Some commerce players are taking on the 800-pound Google gorilla in the room by becoming mini-Googles in their own rights. OTAs, for example, are serving highly targeted advertisements for other travel companies amid their own hotel, car or flight listings.
That may seem counterintuitive, but it makes sense when you look at a typical customer journey. Travel buyers generally start researching a trip weeks in advance and comparison shop dozens of sites before they buy. OTAs have traditionally focused on trying to get every user to make a purchase. Now, marketers are embracing the idea that 95 percent of their visitors aren’t going to buy in a given session and starting to think about their upper funnel users the way a search engine would.
Shoppers who never buy still carry a deep well of behavioral and intent data, like origin and destination cities, dates and times of travel, number of travelers, purchase and browsing history, loyalty, carrier preferences and even price, vendor and class of service. Using this data to serve relevant offers from advertisers creates a superior, open user experience with ad engagement rates that are 30 times that of traditional travel display advertising.
But won’t it kill your core transaction business?
The key to making convergence work is data science. Marketers must be able to separate browsers from buyers in real time to avoid cannibalizing the core business.
Machine learning allows you to accurately understand a user’s propensity to convert, and with it their likelihood to bounce, comparison shop, engage with ads or exhibit other behaviors. With this kind of insight, you can provide the right experience for every user. When purchase propensity is high, you should carry on as usual. Leave them alone to complete their checkout or perhaps offer them an incentive to “buy now.” But when purchase propensity is low, you should serve an ad to help users keep shopping without needing to stop at Google. Think of it as the Progressive Insurance model for digital commerce: “If we can’t serve you, we’ll connect you to someone who might.
This kind of insight from data science results in a superior experience for every user and a brand-new revenue stream for commerce players with no negative impact on core transaction business.
Convergence means serving the user above all else
Convergence is real. OTAs, metasearch engines and airlines like Iceland Air and El Al, as well as hotels including Hilton, Hyatt and Marriott, already allow competitor advertising on their booking sites. And of course, half of the shopping-related search advertising market has already been snagged by Amazon, whose ad revenues are predicted to reach $20 billion within two years.
To survive convergence, commerce marketers need to stop thinking like single brand destinations and instead become starting points for users to find what they need inside or outside of the walled garden. The future is in embracing practices that serve the user above all else, even when that is as counterintuitive as promoting the competition.
By adapting to this inevitable shift, OTAs and other ecommerce players can beat Google at its own game, provide better information and experiences for users and create a safe, high-margin revenue stream out of data-rich traffic.