Google says that advertisers have seen better results from their paid model of Product Listing Ads and as a result, they will retire Product Extensions which will no longer be a separate ad extension in AdWords campaigns.
Product Extensions are additions to text ads on a search engine results page that include a small image and pricing of the product the user searched for.
Google recommends that advertisers implement Product Listing Ads in order to capture commerce-related searches and promote products on Google.com and within Google Shopping. In addition, Google has introduced new product feed specifications that merchants must comply with by July 2013.
Google AdWords Ad Extensions are a way for advertisers to extend their ads with deeper, more relevant content to searchers in the form of additional links within a text ad. Ad extensions provide extra links to a standard text ad to link to additional pages within your website versus one link to one landing page. Google has expanded their ad extension options from its original release of Sitelinks over two years ago.
Below is an overview of various ways advertisers can implement ad extensions.
A Product Listing Ad is a paid search ad that includes richer product information like a product image, price and merchant name. These ads do not require additional keywords or ad text and they appear whenever a user enters a search query relevant to a product in your Google Merchant Center account. Google will automatically show the most relevant products along with the associated image, price and product name taken from your product data feed file from your Merchant Center account.
Product Listing Ads are only shown on Google.com and some of its search partners. These ads are usually separated from standard text ads and are next to other Product Listing Ads. They are ranked based on a combination of your CPC bid, the relevance of your products to the search query as well as the historical performance of your ads. The more relevant your products are to a search query, the more likely your ads are to appear in a higher rank that your competitors.
Product Listing Ads are charged on a cost-per-click (CPC) basis and you can define your maximum CPC bid just like a regular AdWords keyword or placement. Below is a screen shot of some examples of Product Listing Ads on Google.com.
Please note that you must have a Google Merchant Center account to use Product Listing Ads and it must be linked to your AdWords account. In addition, Google recommends that the products in your Merchant Center account are up-to-date and properly optimized.