The newest update to Google's search algorithm, Panda 4.0, is aimed at penalizing websites with thin, non-authoritative content. One interesting side effect, however, has been its effect on retail websites. eBay (NASDAQ:EBAY), notably, saw a drastic impact on its Google search rankings last week.
Do eBay and its investors need to worry about the impact Google's search algorithm may have on the online retailer's business?
How badly was eBay hurt?
eBay used to find its site listed on the first page of Google results for hundreds of prime search queries. Last week, eBay's share of top 10 rankings fell considerably after Google rolled out updates to Panda.
According to Peter Meyers, who writes for Moz Blog, eBay made it to the first page of Google results for about 1% of all search terms in Moz's data set. (Note, that's not 1% of all searches, but search terms. The actual number of searches depends on how many people are searching for those terms. Make sense?) Over the course of three days, from May 17 to May 20, eBay's share of top 10 rankings fell below 0.3%.
That's a 70% decrease in visibility.
Why did Google penalize eBay?
Google penalized websites for two reasons last week. The first, as mentioned, is websites with thin content or a lack of authority on a subject or keyword. Second, websites that use spammy tactics to generate links for keywords. Sometimes the two go hand-in-hand.
eBay has authority. There's no doubt about that. As a website facilitating billions of dollars in e-commerce every year, Google probably wouldn't penalize eBay for a lack of authority.
On the other hand, eBay utilized some questionable tactics when generating links to its homepage, which may be the reason Google penalized the website. eBay used a clever linking structure on its site that allowed it to rank for hundreds of keywords.
Rishi Lakhani at Refugeeks pointed out that all of eBay's organic Google search results have "/bhp/" after the main domain name. Clicking through eBay, you'll find them under the "See also" header on eBay's search results page. The links seem to be generated based on popular search terms. Apparently, Google doesn't like this tactic, even if the links are arguably useful.
How important is Google traffic for eBay?
Although it's unclear how much traffic eBay receives from organic search results, it's safe to say the amount is significant. eBay is a big customer of Google's Product Listing Ads and other Adwords products, which are placed above search results, so management sees value in ranking highly on Google.
In fact, this isn't the first time eBay has been negatively affected by changes in Google's search algorithm. In eBay's 10-Q, it notes "changes by Google have significantly reduced the amount of traffic our Marketplaces business receives from free search on Google." Interestingly, management doesn't explicitly state it as a risk to the business, though.
With more and more online shoppers starting their search from a search engine instead of specific e-commerce sites, however, Google's impact on eBay ought to increase. Google, and other major search engines, are developing products for comparison shopping. eBay has its own comparison site, Shopping.com, but the trend favors the large search engines.
eBay's far from doomed
Google searches are certainly an important source of traffic for eBay, and Google penalized eBay for misbehaving. The good news, however, is that Google and eBay have a strong relationship with one another through Google's advertising products. If eBay corrects its spammy link tactics, the Google gods may smile upon eBay once again.
As we've seen previously, it's much easier to correct for spammy link tactics than it is to gain authority.
Adam Levy has no position in any stocks mentioned. The Motley Fool recommends eBay, Google (A shares), and Google (C shares). The Motley Fool owns shares of eBay, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.