The retail media market needs a paradigm shift. Sponsored Product Ads (SPA) represent a key component of this arena, and fuel the need for its change. This article addresses what Sponsored Product Ads are, their current status, why retailers and brands should pay close attention – and why the landscape requires a serious shake-up.

So what are Sponsored Product Ads?

Sponsored Product Ads are one part of a broader family of efforts referred to as site monetization programs. They form ad placements, which online retailers sell to brands. Separate from a retailer’s organic catalog, brands can pay to have their products listed more prominently on a given category page, search results page, or wherever else the retailer decides to offer ad placements. Doing this allows retailers to monetize online traffic beyond their core business (i.e. facilitating purchases from customers).

Brands benefit from this in a variety of ways. Beyond just increasing their sales, they can increase their page views in a strategically important category. Further, they can guarantee that products they wish to bring more attention to will be seen by potential customers. These ads can be seen as the online analog of brands paying a brick-and-mortar store to place their products more prominently on their respective shelves, or setting up a cardboard display in a highly trafficked aisle.

Today’s retailers have two choices. Either they can negotiate direct deals with brands to purchase a pre-defined volume of ad impressions at a fixed price, or negotiate a deal with a network demand source. These networks are advertising partners that act as a Demand-Side Platform (DSP) for multiple brands. In the case of a DSP, the DSP receives guaranteed placements and volume from the retailer’s ad inventory; and their clients can bid on these ad impressions. The DSP then picks the most lucrative bid and passes this ad on to the retailer.

The lone, notable exception to this two-pronged approach comes from eCommerce behemoth Amazon. Instead of one-off direct deals or locking its inventory to one DSP, it offers more sophisticated solutions. Brands work directly with Amazon in a competitive ad environment, where they have access to actionable insights about their ads and performance. Further, they can customize their ads, as Amazon offers multiple ad formats for the brands to make use of. Amazon emphasizes this further by controlling its site’s entire ad experience. Brands do not have to worry about their ads existing alongside undesirable content. Nor should they worry about the ads looking foreign or out of place where they are displayed.  Amazon produces a consistent ad experience by controlling both the input and the context. For brands, this means little to no risk of harming their reputation.

Further, as there are very few established DSPs in this specific vertical, conditions tend to be poor for both retailers and brands. The fee-per-impression for media sellers hovers at around 30 percent: and a lack of players in the market hardly incentivizes DSPs to offer better deals. Amazon gets around this issue by working directly with the brands for which they already sell products. Without a third party in the middle, brands and retailers save on the fee, and are free to nurture their pre-existing relationships in a mutually beneficial manner. Brands get the exposure they want at a reasonable price, effectively gaining more working media ad dollars. On the other side of the table, Amazon gets to monetize its onsite traffic without having to split the profits.

Sounds like a significant competitive advantage, how does this play out in the market?

Given the state of Sponsored Products Ads described above, no one should be surprised to hear that Amazon dominates this market. Out of SPA’s estimated $5 billion market today, we estimate that Amazon captures $4 billion. That’s 80 percent of the entire market captured by a single retailer.

Some retailers have tried to get around the limitations of tying their ad placements to a single DSP. How, exactly? By building multiple, distinct ad placements on the same page. They make dedicated ad placements (known as “swim lanes”) for different demand sources, resulting in cluttered pages. As the DSPs provide their own ad types and formats, this often results in an inconsistent and noisy page. Little space remains for organic content above the fold.

And a lack of optimization between the two swim lanes compounds the issue. Without competition between them, the ads may affect each other adversely. In the worst cases, the same product may end up winning both placements as the brand works with the DSP too. The result? An abomination of a landing page where the same product is advertised twice, in two completely different looking ads. Had the brand known that this would be the outcome, they likely would rather save their money on the second ad. Achieving good click-through rates are enough of a challenge without competing against yourself.

However, most retailers lack the resources to provide brands with proper performance insights. Without this, the brand will never know that this happened. Instead they remain in the dark, continuing to spend their budgets inefficiently. Additionally, the DSPs have no incentives to give brands information which may cause them to reduce their ad spend. This results in brands opting to spend most of their budgets away from a black box of unknown inefficiency. Where can they take their money whilst avoiding this situation and the potential marketing pitfalls? Amazon.  

So should retailers just roll over and let Amazon laugh all the way to the bank?

Not exactly. The good thing about this whole situation is that the facts are laid out bare for all to see. Amazon’s success represents a learning opportunity for every other online retailer out there. Brands don’t like black box solutions. They want insights and a clear path to improvement. They need to know what isn’t working and why, and they need to have the freedom to improve upon those things. Other retailers have relationships with brands they can leverage, just like Amazon did. By talking to the brands, and understanding why they avoid spending more money with them, retailers can close the gap little by little. These relationships already exist. Parties pass money back and forth, and mutually beneficial conversions pan out every single day.

Still, not every retailer will be in a position to offer the brands what they want. For these retailers to capture more of the SPA market, they need the whole ecosystem to change. They need better terms from the DSPs. They need competition between DSPs. Increased competition on an industry level would incentivize more reasonably priced fees, as well as increased transparency and ad customization standards.

It would also require DSPs to compete directly for the retailer’s inventory for every single impression. Only then could the retailer start to capture the true value of their ad inventory. Until the retailers come together on this—and until they put their feet down at a structure that disproportionately benefits the DSPs and pushes ever more money in Amazon’s direction—the status quo will remain. One should keep in mind that DSPs can only earn money with the retailer’s consent. Without supply in the form of ad placements, their demand sources will quickly move elsewhere.

The Sponsored Product Ad market needs a paradigm shift, and it needs retailers and brands alike to come together to usher in a new era. Failure to act has given the world’s largest online retailer an 80% share of a $5 billion market so far, and the latter number will continue to grow. If brands and retailers aren’t vigilant and looking for new approaches, the former number will rise too.

NY KnowGo is back for 2019. Stay tuned for more details on an exclusive event dedicated to Sponsored Product Ads! Keep an eye on our soon-to-be refreshed website here: www.nyknowgo.com

The post Retail Media in the Age of Performance Advertising appeared first on Crealytics.

Crealytics’ latest Effective PPC video has arrived. This series reveals game-changing perspectives on PPC advertising…in just a few minutes! Our final video in this series explains the concept of Customer Lifetime Value (CLV) – and why you should consider it in your ad campaigns.

Smart online retailers have increasingly adopted Customer Lifetime Value as a Key Performance Indicator. Taking a customer-centric view beyond the first conversion on follow-up purchases allows the business to grow aggressively…and aim for mid- and long-term profitability.

Today however,  budget and bidding decisions still center around Return on Ad Spend (or “ROAS”). This leaves Performance Marketers disconnected from Customer Lifetime Value. In this Espresso Shot, we shed light on why this gap is harmful and how it can be closed.

This Espresso Shot uses a simplified Lifetime ROAS model – however, Lifetime ROI is the preferred method for most online retailers. To understand the difference between ROAS and ROI, visit the third part of our series.

And remember, you can always get Crealytics’ latest insights sent straight to your inbox.

The post Effective Performance Advertising 4/4: Customer Lifetime Value appeared first on Crealytics.

Crealytics’ first Effective PPC video has arrived. This series reveals game-changing perspectives on PPC advertising…in just a few minutes! Our inaugural video introduces what’s wrong with the current state of Performance Advertising and how it can be fixed.

Traditionally, Performance Advertising focused on measuring impressions and clicks. The last few years have seen a big shift – toward more business-oriented KPIs like revenue and ROAS. But this evolution has stagnated. We’ll explain how efficiency metrics like ROAS can easily hurt your business and how to make the next step in the evolution towards effective Performance KPIs.

Our next video will offer more detail on incremental value. You’ll also learn why switching from ROAS to Incremental ROAS (iROAS) is an important step in the evolution of Performance Advertising.

Don’t forget, you you can always get Crealytics’ latest insights sent straight to your inbox. You can also see our eCommerce Café series – here.

The post Effective Performance Advertising 1/4: Overview appeared first on Crealytics.

Crealytics’ latest Effective PPC video has arrived. This series reveals game-changing perspectives on PPC advertising…in just a few minutes! Today’s video discusses revenue, short-term profit and ROI optimization.

Online retailers care deeply about the profit from any given order. Different factors influence the value of each conversion for your business: category margins, discounts and advertising costs.

But in Performance Advertising today, best practice is to only measure revenue. Our latest Espresso Shot video explains why this approach is more flawed than you think. It also elaborates on why ROI and Profit are better suited than Return on Ad Spend (ROAS) for assessing – and optimizing – the short-term business impact of advertising campaigns.

In our next video, we’ll how you how Customer Lifetime Value helps you optimize campaigns for long-term profit.

Don’t forget, you you can always get Crealytics’ latest insights sent straight to your inbox. You can also see our eCommerce Café series – here.

The post Effective Performance Advertising 3/4 : Measuring Revenue, Profit and ROI appeared first on Crealytics.

Ecommerce professionals value the importance of personalization. Its use in digital marketing makes customers more likely to buy from a retailer.  It also increases the conversion rates of product pages, and helps customers develop more positive feelings about a brand.

However, personalization requires data to be effective. The more that you know about your customers, the more personalization you can inject into your website and communications with them. For many, making the effort isn’t the hurdle. Several solutions exist to help eCommerce companies speak to the individual.

The disconnect comes from collecting and harnessing that data. For a start, most eCommerce companies have significant gaps in their data collection strategies. Even those that fare better than others likely miss out on opportunities to access useful information. Being able to identify these gaps is important for building out your personalization strategy…and developing deeper connections with your customers.

Ask Your Customers for Data

Sometimes the best course of action is just to ask your customers to tell you more about themselves. In the checkout process, many companies opt for minimal data collection to improve conversion rates. This can be a smart strategy that leads to measurable improvements in revenue. However, just because you choose not to collect that data during the checkout process, there’s no harm in trying to collect it at other periods.

Why not provide a coupon in return for a completed survey? Incentivizing customers to share information can work wonders, and reveal useful data for marketing campaigns.

For instance, encouraging buyers to rate their purchase out of ten can unearth fresh information. You could also present them with a list of items and ask them to rank them from “most interested” to “least interested.” Engaged customers will appreciate the chance to air their opinions on your products, making it easier to personalize what you offer them. Plus, recommending similar products will also boost your Average Order Value.

Collect and Utilize Viewed Products, Not Just Purchased Products

Most eCommerce companies fuel product recommendations with things their customers have previously bought. But the items a customer views are nearly as valuable. People may spend days or weeks evaluating a product before making a buying decision. Recognizing this interest – and using it to keep certain products in the limelight – can help personalize your content.

Use Wish Lists to Flesh Out Customer Profiles

Looking for clues as to which products your customers may be interested in in the future? Why not ask them to put a list together?

In the above example, you can see the Amazon Wishlist creation page. It allows users to create a list of items that they are interested in buying, or having bought for them.

Amazon incentivizes their customers to put these lists together by providing some additional benefits:

The lists also function as a platform for price-watching. Customers receive notifications when items on their lists go on sale, or change price. You can bet that Amazon harvests data from those interactions to better understand what matters to its customers.

Adjust Navigation Menus Based on History of Use

What makes a great navigation system for your customers? One that’s easy to use, for a start. It should also require minimal clicks to get them from homepage to product pages (or any other pages important to them). In a previous article, we discussed how static homepages have become a relic of the past for forward-thinking eCommerce companies.

A personalized, non-static navigational experience increases conversion rates and revenue. But more broadly, the way that users interact with your website can be a data goldmine. You should collect every click and action a customer takes. The results will help you provide a personalized experience that matches their browsing habits.

Measure Engagement

Many forms of personalization exist. Building out a deep and intricate web of tailored marketing communications helps eCommerce companies in many ways, but not all are foolproof. Sometimes, a seemingly positive change can yield unforeseen negative results. Be alert to this. Measure everything.

Identify Gaps In Your Data Collection Strategy

Try to identify any gaps in your data collection strategy. Putting processes in place to collect and harness information will be an ongoing battle; but with each new data source, you give your team more of it to work with. You’ll also be helping to build a foundation that will serve your company for years to come.

The post How to Collect and Harness Data…and Improve eCommerce Personalization appeared first on Crealytics.

If you hadn’t already noticed, convergence looms larger than ever in big tech. Its players increasingly mirror the features and business models of their rivals’ in order to grow. The announcements at Google Marketing Live 2019 made no exception to that.

Google’s Marketing Live announced many new ad formats and products. In today’s blog, we’ll focus on the most relevant ones—beginning with Part 1 (below).

Part 1

• With its New Google Shopping Experience, the search giant intends to move deeper down the sales funnel…all the way to the transaction. Google continues to expand from a pure advertising channel to a sales channel. Amazon did the same thing – just the other way around.

Part 2

• With Discovery Ads, Google has introduced a push-based ad format on a personalized news feed (The Discovery Feed). By choosing a click-based remuneration model, the company pushes its boundaries to show highly relevant ads—hoping to compete with Facebook in the upper-funnel stakes.

Part 3

• By introducing Shopping Campaigns with partners and Gallery Ads, Google intends to grow its main search ad business. How exactly? By fostering more competition and higher bids on its core operation.

The new Shopping experience – Google finally understands that it needs to earn the transaction before owning it

Google Shopping ads are one of Google’s most successful ad formats. Increased pushes towards automation and reach through Google owned-properties like Gmail and YouTube are one thing. Expanding from an advertising to a sales channel represents the next frontier.

Google’s early steps toward mediating the shopper/merchant experience – via Shopping Actions and Google Express – struggled to ignite. This felt especially true as Walmart quietly pulled out of the program.

And yet owning the transaction has become an increasingly vital, strategic goal. Not only can it expand its business model by earning commissions on the transaction. It also allows the search giant to monetize its Voice Assistant in the near future. Daily commodities like milk, when ordered through the device, allow Google to process multiple transactions on a regular base at scale.

Another important advantage hinges on the use of eCommerce buying histories to target shoppers across the web. Amazon’s DSP demonstrates the power of eCommerce targeting better than most.

Instagram’s influence increases

Instagram further increases the pressure to own transactions. The Facebook-owned vehicle recently introduced a push allowing brand manufacturers to sell directly through the social network—without ever leaving it. Premium brands would rather see their products shoppable on Instagram…instead of rummaging for them on Amazon.

And while Mr. Zuckerberg’s PR focuses on the privacy aspect of end-to-end encryption through messaging, his real intention lies in building a messaging system with payment options—think WeChat. Having shoppers’ payments information during any product pivot will come in handy.

Every platform needs a promise to make to its customers. Just saving shoppers from having to enter their credit card information over and over again won’t cut it. As a result, Google has finally cloned Amazon’s promise to be safe when shopping on its platform:

“The blue shopping cart on the item shows shoppers they can seamlessly purchase what they want with simple returns and customer support, backed by a Google guarantee. So people can buy confidently, knowing Google is there to help if they don’t get what they were expecting, their order is late, or they have issues getting a refund.“ – Google Marketing Live update.

However, serving the basic needs of the Maslow hierarchy – safety – is a necessity, not a luxury. While Amazon has been the shopper’s advocate for several years, Google has long held back from a clear value promise to its shoppers.

Regardless of whether a basic safety promise will be enough, living up to consumer expectations with guaranteed delivery dates and return handling does another thing for Google in the mid-term. It creates demand for its own logistics services—fulfillment through Waymo, its self-driving car company.

So how does Google differentiate? Mainly by giving users and advertisers the choice of how transactions happen: via Google itself, an online shop, or in-store via click and collect.

Untapping Google as a new sales channel may be a smart choice for small to medium brand manufacturers—whose online shops brought mainly additional fixed-costs, low customer loyalty and a huge struggle to attract tech talent.

Stay tuned for our thoughts on Part 2: Google’s push for more upper-funnel sales

The post Opinion: Google Marketing Live 2019 appeared first on Crealytics.

Ideas and best practices move fast in search marketing. Yet one boasts some serious staying power. Customer Lifetime Value (CLV) remains the best metric to understand the overall impact of your performance advertising campaigns.  If you don’t already, CLV should be the KPI you aspire to as a retailer. Optimizing paid search campaigns for CLV helps retailers to future proof their profits. It reflects long-term investment and growth strategies; both in customer acquisition and marketing budgeting. At Crealytics, we’ve been incorporating CLV into our optimization strategies for over 10 years. We discovered that advertisers who focus on long-term revenue goals make about five percent more revenue in the first 12 months, and can triple that number when they look over a longer time horizon.

What is Customer Lifetime Value?

Customer Lifetime Value is a performance measurement metric. It takes the acquisition of new customers into account – and values the future profits they generate alongside the initial cart value.

But understanding CLV isn’t the same as incorporating it into your search marketing campaigns. Whether it’s due to data availability, organizational roadblocks, or short term priorities, plenty of eCommerce companies still opt for more traditional, short-term metrics. In this article, we’ll discuss overcoming these challenges and the four steps retailers must ascend on their path to CLV-based bidding. We’ll also learn why CLV trumps COS (cost of sale) or ROI-based measurements and how it influences bid management differently from a COS-based model.

Not all performance marketing metrics are created equal. Here’s why:

1: Measuring performance on a cost-per-order basis

Cost-per-order (CPO) forms the lowest rung on the metrics ladder. It measures the total cost associated with generating a single purchase, but fails to inform users of vital data points. Retailers can use it to understand the cost effectiveness of their marketing efforts. However, they still won’t know any of the revenues associated with each sale. Let’s take a CPO of $60. This would be perfectly fine for a TV worth $800. However, it would be a disaster if the item sold was a dress for $40. As an advertiser, if you sold 20 dresses but only two TVs, a CPO-based model would allocate more budget toward the dress!

2: Measuring performance based on cost-of-sale (COS)

Slightly higher up the chain comes COS (or Return on Ad Spend). Factoring in revenues unlocks a little more accuracy for retailers, who can calculate the relation between revenue and costs as a result. Decision-makers can at least optimize their campaigns based on past revenues. Because the revenue from the television sales vastly trumps that of the dress, retailers would allocate more budget to that campaign and away from the dress.  But we still don’t really understand what role search marketing had in acquiring new customers or in driving profit.

3. Return on Investment

This metric delivers a healthy advantage over companies that use CPO and COS. Retailers who do so know not only their order and revenue, but the margins involved too. ROI calculates the exact profit at the time of order: the margin that remains after returns, cancellations and cost of goods sold (COGS). During sales periods, retailers might lower prices to a negative margin (in order to beat their competitors). If they sell a TV at a margin of $-50, but their dresses still have a positive margin of $10, they can still allocate budget towards the dresses despite an initially lower revenue. This model offers a healthier way of looking at search, but only provides a view on a per-transaction basis

4. Customer Lifetime Value

Optimizing for profitability in the here and now is one thing. But retailers that optimize for CLV add in an estimation of what profits may be generated in the future. Say a retailer’s dresses attract more new customers than shirts. Even if the shirts have slightly higher margins, more budget will be allocated to dresses. Why? Because the profit generated through dresses over the next 12 months will be higher than the profit generated through the shirts.

COS wrongly portrays a picture of profitability. ROI shows actual profitability but only at the time of the order…

How does Customer Lifetime Value Work?

One of the reasons CLV works better than its predecessors stems from its focus on New Customers. Accounting for the acquisition of (and future profits from) this group helps retailers stand out from the crowd. Why New Customers? Because on average, new customers generate more profit than existing ones. They are more likely to return after making their first purchase and your other less expensive, organic marketing campaigns can do the heavy lifting once they are in the fold.

We’ve spoken before about efficiency versus effectiveness in paid search. For retailers who focus on ROAS or ROI see their budget flow towards branded terms or RLSA. After all, these areas boast better conversion rates. They cost less. They are more efficient.

They also come shackled to a big problem. Retailers who shoot for efficiency sacrifice future expansion. Yes, keeping hold of existing customers remains important. But new customers (NC) fuel a company’s growth. It costs more to attract this group. And they bring much more value. Unlike efficient-friendly brand terms or RLSA, advertisers can snag new customers using upper-funnel channels like Non-branded text ads, Shopping or Programmatic Display. In this respect, must those retailers used to doing things the old way have to set new expectations?  Can they stomach allocating budget towards areas that just aren’t as efficient in exchange for greater long-term gains?  Is the organization willing to sacrifice short term, yet unsustainable, revenue in return for longer term profitability and a healthier customer portfolio?

CLV can illustrate the benefits waiting for those retailers prepared to take a leap of faith. You add the profit a new customer will generate over their lifetime in the future to the profit of the first purchase. By doing so, budgets can be allocated to channels that maximize profit over a longer time horizon. For example:

• Customers that come in through PPC generate:
  • 12 months: purchase 1.8 times on average with a profit of *$30
  • 24 months: purchase 2.2 times with a profit of $50
  • 36 months: purchase 2.5 times with $65 profit
• The client wants to be profitable after 12 months.
• The 12 months profit is added to each purchase made by a new customer:
  • Ad spend: $300 | Margin: $280 = Negative ROI, unprofitable
  • Ad spend: $300 | Margin: $280 + Future profit: $300 (10 NC* LTV $30) = Total profit: 580$, positive CLV ROI after 1 year

→ More budget can be invested in this channel because high NC rate leads to higher profits after 1 year than a channel with low NC rate would generate

→ The higher the budget, the more new customers, the lower the initial profit, but the higher the future profit

*This future profit already includes any future advertising costs

How does CLV influence bid management?

By its very nature, bid management assigns higher bids to products or keywords with higher earnings. Therefore, bid platforms will automatically assign higher bids to products or keywords that generate more new customers.

• Product A: Cost $300 | Margin $350 | NC profit $300 → Total profit $650 (before ad spend)
• Product B: Cost $300 | Margin $350 | NC profit $100 → Total profit $450 (before ad spend)

→ Product A has higher earnings, therefore receives a higher bid. With an ROI model both products would have received the same bid as they have the same margin at the same cost.

Today, most automated bidding solutions optimize towards a fixed ROAS efficiency target.  In this scenario, Customer Lifetime Value can only be implicitly applied. By accepting overall lower ROAS targets and therefore using higher budgets, companies assume to also attract more new customers.

But without precise new customer tracking to validate such assumption, this approach becomes flawed. In a worst-case scenario, the increased ad spend triggers non-incremental repeat purchases, destroying the myth of ever-decreasing marketing costs with every follow-up transaction.

Automated Bid Management systems can only reach the next level of maturity when they work on conversion data that differentiates between the first transaction of a new customer and repeat purchases. Typically, only a CRM system can tell which of the two happened. And connecting conversion tracking to CRMs presents a challenge to Digital Marketing – it requires development resources from the IT department.

The next challenge is to assign different value tags. Automated bid management solutions are driven by data – as opposed to managers, whose decisions are supported by data. Automated Bidding systems hence need incentives to spend more on campaign segments that drive new customers. This can be done by modelling different conversion values. The conversion value of a transaction from a new customer needs to be increased; it needs to be decreased for a repeat purchase.

But by how much? Customizing conversion values in Bid Management requires not just a firm appreciation of data science, but a generous chunk of change management, too.

Want more information on applying CLV-bidding to your campaigns? Check out our video series on performance metrics here.

The post Basics to Brilliant: Futureproofing eCommerce with CLV bidding appeared first on Crealytics.

Today’s online shopping experience brings challenges as well as opportunity. Google and Amazon have made things difficult for brands and retailers: exactly how can they compete? In October 2018, Crealytics launched a one-day conference to answer this question.

Over 100 brands, retailers and technology vendors attended our inaugural event, which focused exclusively on Sponsored Product Ads, Co-op Advertising and Retail Media.

And so we’re bringing it back for 2019. This year’s NY KnowGo promises bigger and better content. Participants will hear from industry experts, gain vital knowledge via breakout sessions and meet peers through exclusive networking opportunities.

No other event dedicated to these topics exists.

Check out our relaunched website at www.nyknowgo.com – you’ll find ticket sales, dedicated blogs and all the latest announcements.

The post NY KnowGo is back for 2019 appeared first on Crealytics.

In this four-part series, we’ll be looking at the co-op marketing challenges retailers and brands must be ready to tackle in 2019. We’ll identify the top five challenges facing each side —and discuss how these challenges can be overcome. In this first part, we will examine the challenges associated with tracking, verification, and unoptimized processes. When discussing brands in this article, we are referring to manufacturer brands. Specifically, those supplying retailers with their consumer goods.

If you’re unfamiliar with online co-op marketing, check out our introductory article on the subject:

https://www.nyknowgo.com/post/thebenefitsofonlinecoopmarketing

‍For busy readers, we’ve provided a quick summary of the article’s content at the top. If you find the topics interesting, they are discussed in more detail below.

1.    Establishing tracking and verification processes

2.    Identifying a sustainable and scalable workflow

3.    Communications and collaboration

4.    Financing, acceptance, and approval

5.    Brand safety

‍

Establishing tracking and verification processes

When it comes to co-op marketing in an online setting, there is a lack of established infrastructure. What does this entail? It means that the bones of contention, such as data-sharing, remain unsolved. Brands engaging in online co-op expect to see performance reports, similar to those accessed when conducting their own online performance marketing activities. It’s a reasonable expectation, but not without complication. Online marketers expect this level of performance transparency.

That being said, sharing performance reports with affiliated companies is not something most marketers would be familiar with.The industry-wide culture is to protect performance data as securely as possible. More than a few retailers’ eyebrows will raise at the mere mention of sharing their performance reports outside the company. Even with their own suppliers. Still, can you imagine the prospect of a brand spending its dollars blindly? It flies in the face of everything marketers have come to expect when managing online budgets.

Beyond evaluating performance, brands must define new ways of verifying that their co-op budget is being spent as agreed by the retailer. Co-op marketing in the offline world did not really face this issue. Cardboard cutouts, flyers, billboards. These are tangible, physical objects, plain for all to see. In online co-op, however, things become diffuse. Ad impressions don’t exist in a physical space, they appear and exist in brief moments on a would-be customer’s device. This means that unless the brand is allowed to track impressions directly, they will have to trust the retailer is spending the money on what, how, and how much was agreed upon. The brand must see their marketing dollars aid them in meeting a business objective. Simply subsidizing the retailer’s marketing costs for the sake of charity won’t cut it.

‍Identifying a sustainable and scalable workflow

As alluded to above, online co-op remains an uncharted field. The lack of optimized processes follows as a natural consequence of this. These include:

• Technical processes – how are the co-op activities going to be structured and delivered upon?
• Actionable processes – who is doing what and when?
• Creative processes – who approves concepts and collateral on either side?
• Reporting processes – who will share what data and how frequently?

Each of these questions requires an answer for a co-op marketing campaign to get off the ground.

Today, no established best practices exist. Retailers might suggest for a brand to spend a certain amount. The brand must then accept this proposal and shift the budget over to the retailer. Marketers have no streamlined platform or interface to work through. Everything happens through emails and agreements. In this sense, players conduct online co-op in much the same way as its offline counterpart.

However, in this unintentional homage to its comparatively slow-moving roots, online co-op is also forfeiting many of the advantages of moving efforts online. The status quo is a far cry from an interface allowing marketers to monitor campaigns in real time and shift budgets accordingly. Brands must continue to push retailers on their co-op processes and technology. Only by doing so can true efficiency and agility become realistic objectives, not merely an abstract and theoretical carrot.

Stay tuned for the continuation of this series. The next article will cover the final three co-op challenges facing brands in 2019. For more information on these subjects, why not visit www.nyknowgo.com – we’ve revamped our website for 2019’s conference!

The post Co-op Marketing’s Top 5 Challenges In 2019: Brands’ Edition (Part 1) appeared first on Crealytics.

Retailers and brands are missing out on potential revenue and efficiency by not pursuing opportunities in Co-op marketing. This article explains why Co-op is increasingly garnering attention among the top online retailers. It also explores some of the challenges that retailers and brands face when they engage in online co-op marketing. 

Let’s start with the basics. What do we mean when we say Co-op marketing? The practice has been around for a long time. It’s a simple concept: a manufacturer of a product buys in on a retailer’s marketing efforts in exchange for increased exposure. This has a series of advantages for both parties. 

How does digital Co-op benefit retailers?

The retailer will typically engage in marketing efforts regardless of their brands’ willingness to share those costs. They sell products for a variety of brands, attempting to persuade would-be customers to take a look at their catalog. Hopefully, they then decide to buy something. Barring considerations of margin, price, and stock levels, the retailer will not be too bothered which of their products the customer decides to purchase.  

Let’s say a brand wants to share some of the retailer’s marketing costs (in exchange for skewing the marketing message toward a specific section of their catalog). The retailer faces a relatively cheap trade-off. They take less risk upon themselves, and give up relatively little. 

How does digital Co-op benefit brands? 

However, Co-op benefits more than just the retailers involved. Brands have plenty of incentives to engage in such activities too.

Given the extremely competitive atmosphere in today’s global, online retail economy, it can be very challenging to stand out among the crowd. Plenty of great products have been abandoned, not because they were pointless or deficient, but because they did not find their audience. Having the spotlight of a prolific retailer shone at your products can be a powerful way of raising awareness. It can also help brands overcome gaps in experience; gaps that the retailer may be better equipped to tackle. For brands seeking to sell their products across regions or globally, it can be difficult to find the right messaging for each respective local market. 

The costs associated with conducting market research, hiring local experts, and formulating a cohesive, consistent strategy should not be overlooked. By working with retailers already familiar with these markets, the brand can spend their marketing budgets more efficiently. After all, they can rely on those retailers’ established teams and experience. 

This sounds all well and good. What are the numbers? 

For a lot of companies, the sole concern of whether something is worth pursuing rests on how it will affect their bottom lines. So let’s see what’s going on in the industry. Estimators put the global Co-op market at around $70 billion dollars*. This amounts to roughly 12 percent of all marketing spend. The fact that Co-op isn’t channel specific means we can already see tremendous room for growth. Diving deeper, more than 80 percent of this amount takes place via offline channels (think billboards, TV commercials, offline media, and in-store media). With retailers devoting more and more of their focus towards online channels, it is only a matter of time until we see Co-op efforts move further in this direction, too. Early adopters are already ingesting some of the advantages related to marketing efficiency. They are also uniquely poised to define the practices and expectations for Co-op marketing in an increasingly online world of commerce. 

Online Co-op has its own set of challenges and opportunities. 

As the nature of marketing has evolved and shifted towards measurability and performance, so has Co-op. The days where all a brand expected in return for their cheque was a photo of their shiny, shared billboard looming over a busy city street are long gone. Online retail has ushered in a new world of measurement, in which professionals operate with data and metrics. If you can’t measure it, it’s not worth pursuing. That is the mantra of the digital marketing space, and that is where Co-op marketing has a lot of catching up to do. While other forms of online marketing activities have been remarkably standardized and commoditized, Co-op marketing remains largely ad-hoc. Those pursuing it do so in wildly differing ways. Generally speaking, processes, success metrics, reporting expectations and execution remain defined on a per-deal basis. 

This lack of pervasive best-practices may render the outcome of campaigns more unpredictable. However, in some ways, this can prove an advantage. Brands pursuing specific goals need not worry about having their vision or expectations dampened by tired retorts. “This is just how it’s done” or “This is how we’ve always done it” will become less frequent. In online marketing, Co-op is an emerging strategy. The final textbook has not been written. We’re barely on the first draft. This means brands will have an easier time convincing retailers to agree on highly individualized campaigns that truly complement a brand’s needs. 

Retailers and brands are already in a prime position to overcome Co-op’s challenges. 

There’s no getting around the fact that measurement is a real issue for any party interested in Co-op. Other channels have their path laid out bare for all to see. If you run SEM on Google Ads, it tracks your conversions. Both the advertiser and Google can see that it occurred. In Co-op, this is not as clear cut. The retailer must strike a balance between its own ability to measure, attribute, and report, and the brand’s expectations to see the efficacy of their joint campaigns. Compounding the trickiness of this balancing act are the retailer’s own concerns for data safety, and their desired level of transparency and effort. 

This may be tricky challenge. But it is not an insurmountable one. A big advantage here comes in the form of trust and communication. And to some extent this comes built-in already: both parties already do business together. The already cooperate along the supply chain, and earn millions (or more) worth of revenue together, year after year. It requires no cold calling, nor slogging through awkward introductory phases in an attempt to get a seat at the table. The brand and retailer already pass money and goods back and forth, meaning the foundation for the bridge of Co-op marketing is already in place. Trust remains essential when giving another company money to advertise within the world of online marketing. There is no tangible billboard to photograph, and no boxes of fliers to show off. 

If a true tracking option is not a feasible solution, the brand must trust the retailer to  do what was promised with the funds they are granted. They must trust that the execution was as intended and that they report back legitimate numbers.

Likewise, the retailer must trust that the brand will not adversely affect the retailer’s image or reputation in the market. Ultimately, the retailer has already qualified the brand as meeting their company values and positioning by opting sell their products. This trust has also largely already been established before talks of Co-op marketing  begins. There could hardly be a more ideal scenario from which to build out a lucrative and mutually beneficial partnership.

NY KnowGo is back for 2019. Stay tuned for more details on an exclusive event dedicated to Co-op and Sponsored Product Ads! Keep an eye on our soon-to-be refreshed website here: www.nyknowgo.com

The post Collaborate to Accumulate: Retailers, Revenue and Digital Co-op Marketing appeared first on Crealytics.

On October 10, Crealytics hosted its inaugural “NY KnowGO.” This exclusive, one-day event focused on digital Co-op and Sponsored Product Ads. It welcomed 16 of the top 50 U.S. retailers—including Kohl’s, Under Armour, Urban Outfitters and Foot Locker—as well as leading brands and technology vendors. Several industry leaders delivered lively presentations at the conference. Want a refresher, or interested in learning more about the content? Today’s blog selects seven of the event’s hottest talking points.

1. Who Will Win the Battle for Co-op Supremacy?

Anyone who’s monitored Google and Amazon’s evolution has a similar verdict: convergence. Things used to be clearer cut. Once upon a time, Google was just a search engine. Amazon was just a retailer. But the last few years have seen the giants encroach aggressively into each other’s market.

The lines between the two have blurred, with both offering similar business models. Things get especially intriguing when it comes to Sponsored Product Ads (SPAs) – a key piece of the Co-op puzzle. Amazon built much of its current business model around them, and generated $10 billion’s worth of revenue from them in 2019. But 2017 saw Google follow suit. Head to retail sites like Best Buy and you’ll see trial program SPAs from the Alphabet subsidiary.

And now? Both have extended their reach offering offsite, via digital Co-op. Google has launched a co-funded Shopping Ads beta. Not to be outmaneuvered, Amazon recently introduced SPAs for its Extended Ad Network (in the form of Display Retargeting). The upcoming battle represents a head to head, with Amazon favorably positioned. At NYKG 2018, we learned that victory depends on four competitive differentiators:

Sales Support
Amazon boasts a formidable, proprietary sales force. Google (and other retailers) rely on a third-party equivalent.

Ad Inventory
Google offers little reach by way of ad inventory on other retailers’ websites. In this arena Amazon can again flex its muscles – it owns as much ad inventory as the rest of its competition combined.

Control
Google remains reliant on third-party providers, which means no control over ad delivery or ranking. Amazon’s proprietary tech ensures the opposite: a 100 percent say over its website and product rankings.

Cost
Google receives a major revenues from Co-op SPAs in the form of major “traffic tax.” On the flip side, its rival receives 100 percent of brand budgets.

2. Predicting a $13 Billion Opportunity (Why Digital Co-op is Set to Flourish)

Co-op marketing represents a huge opportunity. At the time of writing, marketers still spend around roughly 80 percent of their Co-op budgets offline – from TV commercials to billboard ads. Things are changing. Purely-online retailers are spearheading a shift away from traditional formats. Yet even in the face of this new, digitally native frontier, retailers and their brand partners reserve just 20 percent of their budgets for digital Co-op activities.

Even loose calculations reveal a staggering opportunity. The total potential spend represents $42 billion. Amazon, which bases most of its operations around Co-op relationships, looks set to eat up around half of this figure. That leaves $21 billion up for grabs. Search marketing accounts for 80 percent of this number ($16.8 billion), almost all of which will be claimed by Product Listing Ads (PLAs). That leaves retailers and brands chasing a $13+ billion-shaped windfall.

3. Why Are Product Ads and Digital Co-op Perfect Partners?

In PPC advertising, Product Listing Ads generate 75 percent of sales. Understandably then, prominent listings are crucial. Because it’s a highly competitive environment, retailers alone will always struggle to afford a competitive advantage. The solution lies in joint budgets. They are naturally higher, resulting in more visible real estate.

4. How to Solve Co-op’s Scalability Challenge:

How can retailers scale Co-op advertising effectively? It’s a tricky question, and one best answered when broken down into smaller responses. At NYKG18, Crealytics’ Head of Global Digital Marketing identified four major constraints, along with their respective solutions:

Lack of Measurability When It Comes to Performance

Current systems make it difficult to distinguish between regular “business as normal” activities and potential Co-op uplift.
Solution: Retailers and brands can divide and conquer.

Lack of Transparency When it Comes to Reporting

How can brands measure their ROI when all they see is overall revenue? In most instances, they remain stuck with generic, unhelpful metrics.
Solution: With the right partner, brands should be able to aim for richer, more granular data reporting. Perhaps granted their own login, thousands of brands could seek a comprehensive overview of product performance (and the ability to review budget spend if necessary).

Problematic Budgeting

Quite often, retailers will take a Co-op budget without making a commitment to spending it. As a result, they remain “on the shelf” – or used as a measure to reduce product price.
Solution: Brands commit to a maximum budget. If Return on Ad Spend (ROAS) is met, budget is used (low ROAS sees the budget frozen). A guaranteed ROAS for brands eliminates any risk of overspend without return.

Complex Manual Work

With thousands of potential brand partners potentially involved, manually implementing (and monitoring) their performance is highly inefficient.
Solution: With the right partner’s technology in place, they should be able to automate all aspects of Co-op campaign management. This includes assigning budgets, establishing thousands of audience campaigns (like retargeting), bidding towards ROAS targets and reporting on performance.

5. Scott Galloway Doesn’t Hold Back When Assessing the “Big Four”

Best-selling author and NYU Stern Professor Scott Galloway focused on technology’s “Big Four”. And the keynote speaker didn’t hold back – putting Google, Amazon, Facebook and Apple under the spotlight during a tour-de-force presentation. Much has changed since the Big Four’s early days. Though they initially won plaudits for challenging old industries, Galloway argued that they now threaten our global economy and society.

Only five nations have a GDP greater than the Big Four’s combined market capitalization, with no sign of them slowing down. Check his after-show interview with our CEO Andi above!

6. How Can Retailers Get Sponsored Product Ads Right?

Retailers who stick to selling products the traditional way make only small retail margins.

Sponsored Product Ads (also known as “Featured” or “Recommended” ads) offer an antidote. SPAs can be a fantastic asset for retailers and brands, generating extra product visibility, promotional impetus and a helping hand for clearance items. They can also help monetize non-purchase traffic via fees. But implemented the wrong way, sponsored content can actually have negative effects on your visitors…cancelling out any potential gains in the first place. What if the advertised products aren’t relevant? What if people don’t want to buy them? Could retailers weaken their overall conversion rate and burn more money they could ever bring in via regular ads?

NYKG invited conversion scientist Brian Massey to elaborate. His presentation showed that retailers can optimize their site monetization programs, declaring A/B tests to be the “supreme court” when it comes to valuable insight. Click here to see how his techniques help retailers to avoid sales cannibalization, optimize ad revenue.

7. Musings From the Retail Panel: Escaping Thin Margins

Back in the day, you could express a retailer’s core capability in two basic steps. First: Buy the right products. Second: Make a margin by selling them at a higher price. Fast forward to 2019. The most successful retailers have evolved to become advertising and media companies. Alibaba owns over a third of the Chinese digital market. Amazon’s biggest growing sector comes from selling ads to vendors (and marketplace sellers).

And the rest of the market is catching up. Zalando – Germany’s #1 fashion retailer – has built its own ad sales house, employing 160+ people. Meanwhile, Target runs Target Media and Walmart…Walmart Media. All share the same goal: make bigger margins and find alternative monetization strategies. NYKG’s retail panel assessed how to build these media subsidiaries. Sears’ Thomas S. Kozak and Staple’s Marco Steinsieck joined Scott Hames (ex-Bed, Bath and Beyond) to discuss Sponsored Product Ads, and tackle how to better collaborate with vendors.

NY KnowGo is back for 2019! Whether you’re a retailer, brand or media player, get in touch today. From tickets to speaker inquiries: find out more at www.NYKNOWGO.com or get updates on our fresh new look via Instagram: @NYKnowGo2019

The post Seven Things We Learned from NY KnowGO 2018 appeared first on Crealytics.

With January in full swing, the search marketing industry faces a raft of fresh questions—not least about automation. What will happen in the next 12 months? Might Google Smart Bidding transform the industry? Can we expect anything new in the realm of Sponsored Product Ads? Will online retailers bring the fight to Amazon? And could a shake-up of the status quo be a blessing or burden for retailers?

Crealytics ponders paid search predictions for 2019.

Google Smart Bidding

Google boasts a wealth of experience when it comes to deep learning, so it’s no surprise that Google Smart Bidding (its machine-learning bidding strategy) is getting smarter. The search giant boasts a wealth of real-time bidding signals. And we mean a wealth: it can analyse 70 million signals in 100 milliseconds. Results look increasingly promising for the retailers who’ve tested it, especially those testing Google’s Target ROAS approach. If you’re looking merely for improved Return on Ad Spend results, the tool’s success is tough to argue with.

What, then, can we predict? Actually, two things. Firstly, that Smart Bidding adoption will increase over time, as advertisers rush for an apparent competitive advantage and the ease of letting Google handle bid calculations and optimizations.  Few would grumble at a bidding approach that assigns value at the time of auction.

The second prediction is that we expect there to be a counter-reaction to the reaction.  Once a significant number of retailers adopt Smart Bidding, the competitive advantages of using it start to disappear. There is no one-size-fits-all bidding strategy (besides, that would be boring). If you have limited changes in your campaigns (and only care about ROAS), sure—go bananas. But of course, the reality is different.

Google Smart Bidding’s Limitations

Smart Bidding’s lack of flexibility means it can’t manage for exceptions. Crucial elements that live outside a ROAS environment (like special promotions) get ignored. The same applies to digital co-op spend, and products with declining inventories.

We’ve said it before: focusing on ROAS targets promotes efficiency at the cost of effectiveness. By extension, feeding Smart Bidding a combination of ROAS and Revenue targets triggers the same result. You have an even faster car, but you go in the wrong direction.

Major retailers don’t use their acquisition budgets to cultivate revenue from existing customers. Rather, their goal is to acquire new customers and decent margins. As a result, the external data sets found outside Google’s algorithm need to be included. Examples include margin, returns, cancellations and Customer Lifetime Value.

TL;DR (Overall Prediction)

Shrewder advertisers will enhance Smart Bidding’s capabilities with more intelligent measurements and smarter eCommerce data integration.

Increased Simplicity and Automation for Search Ads, Audiences

Google first rolled out Dynamic Search Ads (DSA) using page feeds in 2017. It’s not crazy to suggest that this goes further in 2019, with even more automation and alignment to Google Shopping. The scenario might reflect how PLAs work today: a product feed links to an account; and the resulting ads rely on the contents of that feed. For now, it remains a manual process. Might increased automation see the end of users uploading feeds (and selecting pages) themselves?

Responsive Search Ads (RSA) offer further hints at automation, with Google testing its capacities for ad copy. Throw Google some headlines and descriptions and it decides how best to put it into (what it believes will be) the strongest-performing ad copy. With RSA promoted heavily in recent times, could automated ad copy be the norm before 2020? On a separate note, Google’s automated Smart Campaigns has already tickled the interest of many small businesses. It decides both the optimization and ad creatives for users, echoing the automated learning (around structure and query attribution) seen in DSA campaigns.

In Audiences, Google continues to promote In-Market Search Audiences (IMSAs). Yet again, the king of search uses its own user-data to make it work. Performances leave room for improvement, but refinements seem inevitable. Likewise, Affinity audiences (similar to IMSAs) could well expand from Display to Search/Shopping.

TL;DR (Overall Prediction)

Google’s next wave of automated Text Ads simplify user experience.

Text Ad Solutions More Important Than Ever

Text Ad solutions won’t fade away in 2019

In today’s search marketing, Google Shopping trumps the humble Text Ad. But that’s not to say the latter isn’t important. In fact, we think they still have much to offer in the year ahead. Even if text ads aren’t receiving the same portion of budget as 2016, their complexity and nuance hasn’t changed much.  Text Ads remain integral for maximum exposure. They offer more information on a product than PLAs, promote a range of on-site discounts, and help advertisers lock in an auction space presence. Despite declining market share, it’s never been timelier to capitalize on Text Ads. Crealytics’ platform offers a good example. Retailers enjoy more structured, granular campaigns with almost zero manual effort required.

This becomes even more pronounced as Google Smart Bidding for Shopping campaigns creates a commoditized bid platform.  Retailers seeking competitive differentiation via search will need to find new pockets of growth in their campaigns.  Perhaps due to their complexity and relatively low costs, Text Ads provide that opportunity.

TL;DR (Overall Prediction) 

The low cost of Text Ads sees retailers continue to use them as part of wider campaigns.

The Rise of Sponsored Products: More Choice, Lower Fees for Retailers

Additional revenue spinners are nothing new. However: we believe improved site monetization will play a huge role in 2019. But how, exactly? A relative latecomer, Sponsored Ads offer huge opportunities for retailers and their brand partners.

For brands, Sponsored Ads offer extra visibility at point-of-sale. Leveraging prime, online real estate helps them generate more product exposure.

As a retailer, Sponsored Ads unlock a new way to monetize your site. With different ad placements (a.k.a. “swim lanes”) accepted as the spring board for partner-driven products, this revenue source sparkles with potential.

The next stage of evolution doesn’t seem far away. Outside of a dominant Amazon (which runs its own Sponsored Product Ads), many retailers rely on a clique of Ad Networks for mediation. Alas, these tend to limit scale and eat up revenues. All of which whets the appetite for a new solution. Our crystal ball predicts greater control over the sales ecosystem, closer relationships with merchandisers and more diversified demand sources. We’ll revisit this theme in future posts, so keep your eyes peeled.

TL; DR (Overall Prediction) 

Sponsored Ads’ potential comes to the fore in 2019. A clunky status quo triggers a new, better solution for retailers.

In 2017 Crealytics generated over three billion in ad revenue for retail clients including ASOS, Urban Outfitters, Footlocker, and Lands’ End. For a completely new approach to retail performance advertising, including more on the above topics above, get in touch via info@crealytics.com.

The post Search Marketing in 2019: What will happen? appeared first on Crealytics.

As the competition for exposure and positioning on traditional PLA networks like Google Shopping heightens, many brands and retail marketplaces are turning their attention to an alternative form of CPC advertising.

Sponsored Product Ads (SPA) (also called Promoted Listings, Promoted Product Ads (PPA)) are an advertising format that allows brands to pay for better placement on the websites of retail marketplaces such as Walmart, Amazon, eBay. For a CPC fee paid by the brand, a product’s visibility is boosted to the top of the organic results, increasing the likelihood of a sale. These ads are cropping up on category pages, search results pages, and product details pages.

Similar to the display ads you’re used to, these ads work by going through a third party Ad Networks or DSPs which manages the bids from brands and surfaces the products on the retailer’s website.

For brands, these ads generate sales, increase category share, provide more accurate targeting and the ability to reach those very close to a purchasing decision.

For retailers (like Walmart, Staples, Kohl’s, Sears, Best Buy, Wayfair, Target and many others), these ads provide two extra sources of revenue.

1. Revenue per click: CPC value paid by the brand (minus) the network/DSP fees
2. Margin or profit per conversion: since the format works as a click-in, not click-out, The click on the Product Ad leads to the product details page (PDP), and if the ad relevance score is high, then the CTR and the CR probably will also be high

In practice, however, we find that these online retailers or e-commerce marketplaces (the media owners) have a very different view of how their retail media should be monetized, sold and marketed than the Ad Networks and DSPs managing these ad placements. This disconnect in objectives and the lack of DSP options has to lead to a broken system which isn’t benefiting retailers the way it should be.

Three separate objectives

What should be a symbiotic relationship between brand and retailer has descended into a broken system of irrelevant ads and misspent ad money. All because of the differing objectives of the three players. Let’s look at those objectives more closely to see if we can pinpoint the issue.

Retailer/Marketplace

For site monetization teams at large retail marketplaces, the ultimate goal of using Sponsored Product Ads is to generate more sales and achieve maximum yield for their online assets. Using their ad inventory, which is growing QoQ or YoY, they’re looking to get the best CTR & Conversion Rate (CR) multiplied by the highest possible revenue per click, across all their categories.

All that is in addition to being able to sell more high-margin products, accelerate inventory turnover and support their media team in delivering superb media performance metrics such as ROAS, CTR or CR to secure repeated and larger budget allocation from the advertising brands.

However, there are several factors besides CTR, which determine a good SPA relationship. Ad-fill rates often “Ok” in just a few of the categories, yet for the rest of the categories its very low or non-existent, leading to empty ad space or poor ad quality (ie. irrelevant ads). Every irrelevant ad being shown but not clicked is a wasted monetization opportunity for the eCommerce retailers.

Retailers also lack control over their price floors and what brands are willing to pay in order to advertise on the site. This is because big brands often buy media from retailers’ indirectly (through networks or DSPs) as a package in a bundle of multiple retailers.

It’s also difficult to balance the revenue from CPCs against the revenue from a traditional sale. For the retailer’s CFO/CRO Getting both is obviously preferable, but that means DSPs need to make sure they can surface relevant ads for the category or search term.

Finally, there’s no easy way for a retailer to work with multiple DSPs or ad partners at once. Therefore, they are limited in the brands that are eligible to advertise on their site by the ad partner they currently work with and the brands they represent.

Brands, Sellers and Manufacturers

So far we’ve talked about those buying SPAs on retail marketplaces as brands, but any manufacturer or product seller would also benefit from purchasing SPAs. The brand’s objective is to generate sales while justifying their investments to do so, focusing on ROAS, and the impact of the incremental value of their ad spend on the sales performance of their products.

The goal is the same as any other ad format (video, display, PLA) the ad spend must generate a greater lift in sales on that medium than what could be obtained organically.

For SPAs to be worth the investment, brands must be able to see measurable positive sales change, lift in brand-name / product-name search within the retailer’s website, and increased share of sales within the brand category(s).

Ad Network and/or DSP

Ad Networks and DSPs function as the middleman between the brand and the retailer. Therefore, there are multiple objectives to achieve, and two sides to make happy while making money in the process.

• A higher yield of the available retail media inventory to please the retailers
• Achieve campaigns’ objectives for the brands
• Maintain a steady flow of repeated campaigns/budgets from media buyers

The major challenge is their capacity to fill the growing inventory of diverse product categories across multiple retailers and being able to generate substantial revenues to meet retailer’s expectations. At the same time, DSPs need to deliver against the brand’s objectives.

Their current solution is to package similar categories, similar performance, similar interests and sell bundles into a Run of Network (RON) kind of targeting to the brands’ media buyers. Remember that DSPs only get paid if a shopper clicks on a sponsored product ad regardless of if that click leads to a sale.

DSPs focus on automating everything. Automation makes it easier for the brands to allocate campaign budgets, push targeting criteria, and then the network/DSP’s black box algorithms will do the rest. You just have to trust it! This automation includes how the budgets are allocated across their portfolio of retailers. Brands simply receive a report on the average eCPC, average ROAS, average CTR, and average CR of the whole campaign.

This system makes it almost impossible for brands to opt-out of paying for ads on retail sites that are low-performing or irrelevant.

Revolutionizing the ecosystem

In exploring how we might be able to enter this ecosystem, Crealytics has surveyed site monetization teams at multiple retailers running the format, brands allocating budgets for the format, media agency execs in charge of media buying, as well as ad networks and DSPs serving the format.

Doing so has highlighted the fact that this system is not working for brands or retailers in the way that it should. A lack of competition among DSP players means that brands and retailers are stuck using systems that allow them virtually zero control over how these SPAs work. Brands aren’t able to accurately target retailers who are most relevant or who provide the best ROI and retailers aren’t able to fill their ad slots with enough relevant products to effectively monetize the medium. It’s clear that more innovation is needed.

We’re currently roadmapping a solution that addresses these conflicts, pain points and achieves the objectives of all 3 parties.

If you’re working at any of the 3 parties and interested in the results, please contact us.

The post The Sponsored Product Ad Ecosystem is Broken appeared first on Crealytics.