Internet search giant Google has announced that it plans to change its Google Product Search online shopping service to a fully-commercial operation in the next few months — and will operate it under the name Google Shopping. The big difference: Instead of impartially returning product search results from participating merchants — and running ads alongside — Google is going to make retailers pay for preferred placement. Merchants who want their listings to appear at the top of Google Shopping’s search results will be able to pay for the privilege.

The move is Google’s latest ploy to wring more revenue from search, and not totally unprecedented. Google has done the same with things like Google Flights, Hotel Finder, and Google Advisor. However, those services were all new offerings that more-or-less operate alongside Google’s existing search services. Google Shopping will mark the first time Google converts a free, relevancy-based search service into a paid commercial operation.

Is it a smart move? Or is it just another step towards paid placements everywhere?

How Google Product Search works

Believe it or not, Google Product Search is over 10 years old — Google formally announced it way back at the end of 2002, but it had been already been operating for while. The service was initially called Froogle — a pun on “frugal,” get it? — but by 2007 Google had changed the name to the much-more-generic Google Product Search in part because of copyright and trademark issues, but also because the “Froogle” pun just doesn’t work in other languages. Weirdly, Google Product Search has always been in beta — Google doesn’t seem to ever have had enough confidence in Google Product Search to declare it ready for prime time.

Here’s how Google Product search works in a nutshell: Any company can submit individual product listings to make their items searchable for sale in Google Product Search (This is done via Google Base — the same way folks can submit stuff to Google Maps and even Google’s general Web search.) Companies can also bulk-submit items via Google Shopping APIs — Google Base used to have a more general bulk-upload facility, but Google shut that down in 2009 to focus purely on shopping.

Formerly, Google Product Search treated all product submissions equally, applying its search technology to return listings to users that it felt best-matched their queries. Google maintained its impartiality by taking no commission on sales. Instead, Google made money off Google Product Search by running AdWords advertising alongside product search results.

The idea was that the value and integrity of Google Product Search was the impartiality of search results. Sure, merchants still had to participate in Google’s ecommerce program, but without commissions or other incentives there was no reason for Google to favor one merchant over another — Google’s motivation was purely to return the most relevant search results it could.

How Google Shopping will work

Google is throwing that model under the bus over the next few months. By fall, the name will change to Google Shopping and search results will be based on a “combination” of search relevance and the bid price merchants pay to promote their particular listings. So, search results in Google Shopping will match a user’s query, but the top listings will be the merchants who paid Google the most to have their products placed prominently.

That’s not even the beginning. Starting today, Google is testing out new product-listing formats for its general search results. When people perform an ordinary search, Google will show any product search matches at the top of results listings, right below paid ads.

It’s not new for Google to display links from Google Product Search when it guesses (from general search queries) that people are shopping for something. However, Google is fiddling with the format. Users will be presented with larger images (knocking real search results further down the page) and provide direct tools for users to narrow product search by (say) product type or brand. Another big difference is that instead of the presented products deriving from “organic” search results, the featured items in Web search will eventually be based on which merchants bid the highest amounts for the slots. The product listings will indicate they’re both sponsored and from Google Shopping, to help distinguish them from actual search results.

Enhanced product listings aren’t the only change to Google’s standard Web search results. By now many Google users have probably seen Google’s Knowledge Graph, which surfaces specific information about topics right on the search results page so users don’t have to hop around the Web to get some basic information. When Google thinks you’re looking for a particular product, general Web search results will now start using area used by Knowledge Graph to display particular information about that product — along with, of course, links and pricing information from selected Google Shopping merchants who (presumably) will pay for the privilege.

The Google Shopping makeover doesn’t end with Google changing standard Web search results. Once the Google Shopping transition is complete, Google plans to let merchants buy special offers so they can run special promotions like holiday-based sales or inventory blowouts. Plus, to give consumers confidence in the merchants participating in Google Shopping, Google will be launching a Trusted Stores program. Trusted Stores merchants get to display a special badge that shows Google has confidence in them — so much so that Google will offer each shopper $1,000 of lifetime purchase protection from Google Trusted Stores.

Going where the money is

Google’s move to make Google Shopping a pay-to-play service for merchants is indisputably a move to wring more money from Google’s search services. According to market analysis firm Comscore, Google Product Search saw about 80 million visitors during April 2012. That seems like a lot, but it pales in comparison to the traffic visiting the likes of Amazon and eBay — Comscore put their April visits at about 900 million and 335 million, respectively. Plainly, if Google wants to compete with the likes of Amazon and eBay in electronic retailing, it needs to do something to bring more users to its services. Obviously, that means putting Google Shopping more front-and-center in more Google search users general search results.

In the Wall Street Journal (subscription required), Mercent CEO Eric Best estimated that Google currently earns about $800 million a year in advertising revenue from Google Product Search. By charging merchants to list products in Google Shopping, Best estimated Google will generate another $1 billion in revenue annually. Other estimates are less dramatic, with ChannelAdvisor CEO Scot Wingo estimating Google will generate about $250 million a year in new annual revenue from merchants as they shift from free listings to paid listings.

One way of looking at the change is that Google is now going to start charging merchants for all the free traffic they’ve been receiving from Google Product Search over the years. Another way of looking at it is that Google has now decided it has merchants over a barrel, now that Google has succeeded in driving many competing services out of business. (This happened in part by down-ranking them in search results as “content farms” — which has raised complaints from antitrust regulators.)

Slippery slope?

Google argues that converting Google Product Search to a purely commercial service will benefit consumers. For one thing, Google says product listings are more likely to be kept up to date: If a company is paying to have a listing promoted, it’s more likely to make sure the information and pricing is accurate. That increases the value of the service. Merchants are also less likely to let orphaned and out-of-date product listings float around in Google’s service for months (or even years), cluttering up search results. Again, the result (according to Google) will be better product listings and an improved shopping experience.

Commercializing Google Shopping may also make retailers less inclined to spam the service. With free product listings, some less-than-scrupulous or simply over-enthusiastic sellers listed virtually anything — sometimes in myriad different ways — in hopes of generating sales. If retailers have to pay to make those listings matter, they’re more likely to put their efforts into a smaller number of meaningful, paid placements.

However, the move is also another sign of how Google’s ethos is changing. Google used to pride itself on never accepting money for placements in search results, and touted the integrity of its organic search results as its stock in trade. The one thing consumers could count on from Google? Search results were objective and unbiased.

No more. At least for shopping results, search results will now be biased and for sale to merchants. That might be OK if Google Shopping were essentially a showcase for paid ads or special deals, but make no mistake, Google Shopping will still be a search service. Sure, Google Shopping will undoubtedly offer categories and lists of popular items, but the primary way users interact with Google Shopping will be by directly searching for products — just like they search for anything else using Google. With Google Shopping also getting prime real estate at the top of ordinary Google Web searches, paid placements will be right alongside — and increasingly difficult to distinguish — from real search results.

[Images via Shutterstock/Yanik Chauvin, Shutterstock/iQoncept]