Blogoscoped scooped an email to a Google advertiser promoting Google Product Ads:

Product ads are paid product listings that appear when users search for products on Google. Through participation in the Google Affiliate Network product ads beta program, you can promote your products to users actively searching for your products and pay only when users make a purchase on your site.

Google product ads will feature product specific information directly in the ad such as price and product image. During the beta program, Google will be testing to identify the most effective ad formats. Google product ads will complement standard text ads on Google.com and will run independently during the beta.

And these ads could eventually create a near perfect marketplace. Google automatically targets the ads based on your Google Base feed. Either you are descriptive and give Google lots of information that they can commoditize, or you get limited exposure. And as far as pricing goes…

How are these ads ranked?
Ad Rank = Commission × Quality Score. The quality score takes into account the relevance of your product to the user’s query, conversion rate of the query and the matched product ad on Google, your account history, and other relevant factors.

Either you have the maximum visitor value and hand over the maximum profit share to Google or you get limited exposure.

And the ads will have more information in them than organic search results do:

Unlike text ads, product ads will “feature product specific information directly in the ad such as price and product image,” according to the email Google sent some advertisers inviting them to try out the ads this week. Google said that it would continue to work on the most effective format for the ads and that the ads would “complement standard text ads on Google.com.”

This move fits in with John Andrews’ recent post Search Engines want to Eliminate Domain Names

We call developed domain names “assets” because we have difficulty accounting for that stored value. Accounting methods allow for “intangible assets” such as “intellectual property” and “good will”. If you build a successful site, you do it on a domain. When the site is no longer active, the domain retains a significant amount of “stored value” from the previous market success.

Search engines want to take back that stored value, or perhaps keep it for themselves. On many fronts, the domain name is in the way.

Google also launched a click to find out what’s here option. When you think of how they carved out a dominant position in the map market, how they have aggressively pushed maps into the search results (even for some queries that lack local modifiers), and how they have merchants upload product feeds, what is to prevent Google from offering inventory data and hotel booking experiences right in Google’s search results? Seedy & scammy offers will continue to be pushed through AdWords/AdSense so Google can keep an arm’s length distance from liability, but what happens to the CPA affiliate market (and small affiliate networks and thin affiliate sites) when the #1 lead source for most legitimate merchants is Google.com? Will they force brands to pay for leads that are already driven based on their brand? Can they push the “organic” results down far enough to make the CPA option more appealing? What lead channel could possibly be anywhere near as clean as the #1 search engine?

A Twitter board member confirmed commerce is going to be part of the Twitter revenue strategy as well:

“Commerce-based search businesses monetize extremely well, and if someone says, ‘What treadmill should I buy?’ you as the treadmill company want to be there,” [Todd] Chaffee said. “As people use Twitter to get trusted recommendations from friends and followers on what to buy, e-commerce navigation and payments will certainly play a role in Twitter monetization.”

I could only imagine that those relationships will be affiliate driven.

Generally central networks have taken a dim view of affiliate marketing because it competes with their business model, but once they become themselves that will surely go away. Google’s test is only a beta, but even if it fails they will try something similar again. They have to keep evolving their model to keep growing revenues.

More: continued here