Google seeks revenue from online retailers

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By Alexei Oreskovic

SAN FRANCISCO (Reuters) - GOOGLE (GOOG.NQ)Inc is selling a special search product to online retailers, as the Internet giant widens its hunt for new sources of revenue.

Google Commerce Search, which the company on Wednesday said it would begin selling at a starting price of $50,000 a year, puts a key element of a retail website's shopping experience in Google's hands: the consumers' ability to find merchandise.

Google wants to operate the search capabilities for retail sites on its own computers, using a data feed that the retailers provide of their product catalog. Google, the world's No. 1 search engine for Web pages, can perform searches of a retailer's catalog significantly faster than what is currently available on many retail sites, Google Enterprise Search Lead Product Manager Nitin Mangtani said.

"Retailers convinced me that there's a need for this type of product," Mangtani said, adding that sluggish search performance on retail sites can send shoppers elsewhere and hurt a retailer's sales conversion rates.

He noted that retailers can also save on infrastructure and maintenance costs since Google's product is "cloud-based" -- meaning the software is hosted inside Google's own data centers instead of on a retailer's computers.

The commerce search product is the latest example of Google's expansion from Internet search and advertising-based businesses into technology products aimed at corporate customers.

Advertising contributed 97 percent of Google's roughly $22 billion in 2008 revenue, but the company has said its cloud-based email and productivity software now generate hundreds of millions of dollars in revenue. Google expanded the ad campaign for its software applications globally last month.

Gartner analyst Van Baker said a recent study by his group found that very few large Internet retailers plan to make any changes to their basic e-commerce technology.

"There's not a whole lot of evidence that they're looking to switch," Baker said, speaking about e-commerce technology in general, and not about search functionality in particular.

Google's Mangtani said the commerce search product is not intended for the handful of top-tier e-commerce companies, like Amazon.com Inc, most of which use their own home-grown technology.

But he said there was plenty of demand from the top 1,000 retailers in key markets like the United States and Western Europe. Footwear maker Birkenstock USA is the first customer officially using the product and Mangtani said a "good number" of retailers have been testing it over the past three or four months.

The $50,000 price includes up to 10 million search queries, Mangtani said. The price for retailers whose sites have a volume of more than 10 million will be negotiable on a case-by-case basis, he said.

(Reporting by Alexei Oreskovic, editing by Maureen Bavdek)

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