The world’s largest search provider and the world’s largest retailer are breaking up – when it comes to local ads anyway.
In the summer of 2014, Walmart signed up for Google’s newest advertising service that directs shoppers to products in nearby stores. Local Inventory Ads are Google’s real world answer to its Shopping ads – which direct consumers toward inventory on online retail sites. Google requests that brick-and-mortar stores also provide inventory information so it can direct consumers to where products are available nearby, especially if they’re searching on a mobile device and want it nowish.
The Shopping ads have been a success; AdGooroo estimates spending on Google Shopping ads has increased 62 percent to almost $650 million in February, from April 2014, when the digital-marketing researcher began tracking. Local Inventory ads have not been as popular. Part of that is that it is simply harder for real world retailers to measure whether the ads result in store sales – online merchants can track user conversions from ads, in-store retailers not so much.
Wal-Mart executives have told Google that Wal-Mart pulled out in part because it wants to offer a similar local-inventory service itself, rather than pay Google to do it, according to one of the people familiar with the situation. With 5,000 stores, Wal-Mart is better equipped than other retailers to satisfy shoppers who are using smartphones to find merchandise nearby.
The other issue at hand, however, is the inventory information, which many retailers, like Walmart, don’t really want to share with Google.
According to sources close to the matter cited by The Wall Street Journal, the retailer pulled out over concerns about sharing store inventory and pricing data with Google. In the U.S. alone, Wal-Mart has about 5,000 stores, most housing more than 100,000 products. That means that Walmart was sending Google more than 1 billion lines of data daily.
Wal-Mart was particularly worried about exposing prices, which can vary from store to store, another person familiar with the matter said.
The Walmart scuffle highlights Google’s ongoing issue big retailers – they worry that Google is muscling in on their customer relationship and harvesting data that is rightfully theirs (the retailers’).
“The really sensitive information for retailers is inventory levels, which gets into their strategies for making money,” said Michael Griffin, chief executive of Adlucent LLC, which helps retailers market through Google ads and other online channels. Adlucent surveyed the top 35 U.S. retailers, excluding grocers and restaurants, on Tuesday and found that 17 percent were using Local Inventory Ads.
A Google spokeswoman declined to comment on the company’s relationship with Wal-Mart, but did note that Local Inventory ads are getting traction and adding merchants. Macy’s Inc., Recreational Equipment Inc. and Office Depot Inc. all use the service.
“There’s always a question of what retailers should do based on their status in the market. If they are a category leader, are they better served entering the fray or is it better to rely on their brand awareness to carry them without Google?” said Chris Copeland, CEO of GroupM Next, a unit of ad giant WPP PLC. “It’s a lot more critical for challengers that are trying to take market share from category leaders than it is for a company like Wal-Mart.”
Wal-Mart may be out when it comes to local inventory advertising, but it still remains a big buyer of Google’s Shopping ads.
After all, online, it still has Amazon to catch. (Amazon pointedly does not use Google Shopping ads, and is a competitor for inventory searches.)
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