“Amazon Ads, why?”. It all started for me back in 2018 when I interviewed some of the world’s leading PPC experts and surveyed award-winning paid search agencies. They were all doing Google Shopping campaigns but what about Amazon Ads? Very few of them invested there.
Since then, Amazon Ads has caught up on both Meta and Google. The advertising revenue of Amazon represents 7% of its business. But those 7% already correspond to almost 20% of Google Ads. It’s on fire.
But it is not all about Amazon. When you dive deeper into the online retail marketing space, you quickly find out that retail search is not the only advertising lever there, and that Amazon is not the only player. Beneath the surface, you will find a a whole new world of what we call “Retail Media”: advertising during the consumer journey in retail sites, marketplaces and even beyond. It is both the digital version of trade marketing, it is the “paid search” of product search, and it is a challenger to programmatic advertising. And whereas Amazon is popularising it, there are plenty of other players in the market. Especially in Europe.
(Source: “State of Retail Media in 2022: Europe”, Innovell 2022)
State of retail media in Europe
We researched the retail media market for the newest Innovell report: “State of Retail Media in 2022: Europe” and uncovered an extremely dynamic business sector with phenomenal growth rates and new entrants every few months. There were 6 main reasons for the massive growth of retail media as we shall see below.
Obviously, the hypergrowth that ecommerce is experiencing makes the “media” itself grow, because that media is ecommerce activity. The more time consumers spend on retail platforms and marketplaces, the larger the ad inventory of retail media becomes. And as marketers, we know it quite well: users are spending a heck of an amount of time before they purchase something online, aren’t they? These online window shoppers are being monetized via retail media.
And ecommerce platforms are pushing for it. Many retail sites are expanding from brand-centered ecommerce platforms to category-focused marketplaces. This has given unicorn start-ups such as Mirakl an amazing playground to develop in, as it provides the technical platform for that endeavour.
Along with marketplace investments come a desire to monetize, and retailers are looking to Amazon’s 5% of GMV (Gross Merchandise Value) revenue from advertising for inspiration. Another 5% of margin could make a huge difference in the retail business, where low margins and high volumes have long been the norm.
But brands are pushing retail media too. They were used to investing in trade marketing to stimulate retail sales, and the new digital version of digital advertising during the consumer journey has proven to be a sales activator too.
From an organisational perspective, it is much easier to justify retail media investments with measurable impact than trade marketing budgets that are being poured into periodical retail negotiation to theoretically boost sales.
And finally, users are changing their behaviour too. We frequently hear of new surveys showing how users no longer start their product search journeys on Google but have shifted to Amazon. Users, of course, have erratic behavior and will start their journey in all sorts of places and even search simultaneously in several channels. One thing is certain though, product search is convenient and easy on Amazon and if you are a Prime member, your purchases will be delivered tomorrow. Retail search is on the rise for sure.
Show me the money
Easy, you take budget from your Google Ads and Facebook campaigns and put them into Amazon, right? Well, not really. We found hardly any evidence of that happening. Those budget streams are rarely connected directly.
The quarterly reports of the other ad platforms are not showing signs of budget transfer either. During the past few years of Amazon Ads booming, Google Ads has been increasing its own growth too. And the recent difficulties for Meta were caused by something entirely different, namely Apple’s cookie gate. A recent study from McKinsey confirms this. It estimates that 80% of retail media budgets are likely to be “net new” rather than transfers from existing advertising budgets. (Source: https://www.mckinsey.com/business-functions/growth-marketing-and-sales/our-insights/busted-five-myths-about-retail-media)
Retail media is trade marketing digitally transformed
One of the sources for retail media funding is the shift from trade marketing. Trade marketing has existed almost since the outset of retail itself.
But where trade marketing is something that is often discussed in quarterly or annual distribution negotiations as a compensation form, retail media can be invested and optimized in real-time. And more importantly, its impact is measurable and can be put in relation to incremental value it generates.
(Purchase) data is the new oil
Retail media has product search as its engine and purchase data as its fuel. We hear often enough that “data is the new oil”, but perhaps it is in reality purchase data, a refined form of data, which could show the real value of data, as it allows advertisers to perform high quality targeting.
Most of the experts we interviewed for our report insisted on the quality and actionability of the data issued from retail. Both data from online ad platforms on marketplaces and offline from retail outlets capable of understanding the purchasing patterns via behavioural data.
Retail media is a challenger to programmatic advertising
Retail search is already a new PPC contender growing faster than most of its competitors. But on top of that, the promise of audience targeting on the basis of purchasing data from the same retail media platforms is a potential contender to win the programmatic space. Remains to be seen whether the data really is that good. If indeed it is, the epicenter of programmatic advertising could well shift towards retail-data-driven platforms in the future.
On 19 July on Hero Conf London, we will dive deeper into retail media and explore the many local pureplayers, vertical marketplaces and hybrid on- and offline grocery chains occupying the retail media space together with Amazon in Europe.
We will also propose a five-step approach to winning on retail media for brands. It applies both to those who have not started their journey and those who are already active in retail media on one or more marketplaces.
In this session you will learn:
– What the drivers of “retail media” are
– What Amazon and other marketplaces have in stock for marketers in 2022
– If and how you should position retail media in your PPC strategy
Maximizing eCommerce and Performance Marketing Activity
The pandemic and resulting consumer behavior changes have led to a new era of eCommerce, with people around the world increasing their reliance on online shopping and brands investing far more money and attention in direct-to-consumer activity. It’s thought that 78% of D2C brands have increased their marketing budget over the past few years compared to only 60% of traditional retailers.
With so many businesses turning to eCommerce to drive overall business growth, there is far more focus on the end-to-end customer experience, CRM, and broader data usage to help maximize the value of paid traffic. Here are a few of the key areas you can focus on to help drive success;
Building a Unique and Engaging Brand Experience
With so many new brands and so much competition, traditional brands are now looking to build better experiences, with incoming paid traffic being a big consideration for net new customers. Key aspects for new users coming from paid channels include more considered landing pages (with more story-telling and engaging branded content – there are some good examples here) and initial user journeys (curating products better and allowing for more engaged users, etc,).
Often there’s a need to educate users, leading with content, particularly if traffic has been driven through upper funnel paid channels. Experiences should be built around audiences with a focus on engaging content and unique user experiences. Think about how you’re telling a story and selling the brand to users from different campaigns and try to make your site unique, interactive, and deliver engaging content. A great example of this is Asket, which sends paid traffic to more curated landing pages (as per this example) and also does a great job of telling the product and brand story on their product detail pages.
This is just one example, but brands like AllBirds and On-Running are also really good at this. More traditional brands need to catch up to the DTC brands here. Lots of our clients are now investing in this area.
Better Post Purchase Experiences
With new DTC brands emerging every day, driving repeat purchases is key to allowing for higher CAC and scalability. Key considerations here include up-sells through a strong check-out experience, post-purchase considerations, and creating a strong loyalty offering to drive second and third purchases. It’s essential to think about all the touchpoints, and how to use customer data wisely once it is acquired.
Optimizing the Initial Landing Experience for New Users
It’s important to have different landing pages for different groups of users and campaigns which reflect different objectives and brand positionings. Consider things such as data capture prompts for paid users (based on new users), quick links for easy navigation (to considered pages that will aid the journey), and capitalize upon the opportunity to personalize the user experience.
For example, for a user who was driven to the site via Google Shopping, showing more prominent cross-sells or highlighting a price match CTA is likely to hold more weight than a user who came direct (these users are often more price sensitive so it’s important to try and maximize these kinds of things).
The importance of A/B testing really comes into play here to better understand how to maximize the traffic
Utilizing and Obtaining More First-Party Data
One of the bigger shifts in the market is changes with regard to privacy and stricter regulations coming into play. Last year’s changes around iOS 14 and Google moving to a cookie-less world pose new and continued challenges to advertisers.
Across paid channels, adopting your 1st party data will help drive greater success. Creating segmentation such as VIP or At Risk will allow you to target more relevant content. Capturing that data is also increasingly more difficult, in addition to pop-ups on site as mentioned above, it’s good to consider value exchange and rewarding data sharing, particularly on social channels, enticing new customers to share details or encourage re-engagement.
We are increasingly seeing brands become more creative with the way in which they do this, with things such as engaging quizzes to aid product fit, etc. The data from this can be fed into a customer property within your CRM.
Continue to Add Value in a World of Automation
It seems over the past 18 months, Google Ads has had a complete overhaul. Now with Performance Max adoption soon to become mandatory, focus on continuing to add additional value. Consider how you can maintain a level of control over the catalog and display ads within campaigns, and how the users will experience the brand once they land on site. Supply the campaigns with a strong set of assets, and build out and test relative asset groups to better understand what resonates best with the user. There may be some key learnings you can take here, with regard to site merchandising. Finally, think about how you can incorporate business data, best sellers’ insights, or margins for greater efficiency.
Enhancing your Activity
One of the biggest trends we’ve seen across our clients of late is the diversification of channel mix and reaching further upper funnel audiences. The likes of TikTok, Snap, and Pinterest have been of particular focus. However, one of the bigger challenges is justifying the role these channels have to play to key stakeholders when typically ROAS is lower here. CoS has been a key metric that has allowed us to do so.
Using CoS allows us to understand the wider impact of paid marketing on-site revenue. Scaling spending whilst keeping CoS flat is the overall goal – but when spending more and assessing your CoS and overall revenue you can begin to understand the impact of additional or less spend on-site revenue.
We’d still recommend measuring and optimizing towards platform ROAS to ensure campaign activity is as effective as possible. However, this allows you to understand the diminishing returns of paid activity and to forecast more accurately how your paid activity can contribute to eCommerce results as you invest more.
Another key factor is that a lot of brands will monitor platform ROAS on a small lookback window (7 days on Facebook for example). Whereas a number of brands will have a much longer path to purchase and using CoS allows you to account for media spend and revenue over a much longer period
Consumers expect online experiences to be smooth and friction-free, and with an ever-competitive marketplace, it’s important brands put the time in to ensure they stand out and speak to their audience.
Creating quality content both on-site and across paid channels is a great way to drive traffic. It’s also critical to identify the ways in which you can keep your audience engaged, driving greater data capture and increasing brand loyalty. And finally, ensure you are always testing across your site and media mix, helping drive insight into actionable next steps for greater success.
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