How Retailers Copy Amazon’s Advertising Activity

  • Retailers want to reduce Amazon’s dominance in e-commerce advertising.
  • Kroger, Instacart, and Walmart are copying tactics from Amazon such as pricing and ad formats.
  • Retailers are also focusing more on third-party sellers, which could generate new ad revenue.

As retailer margins continue to shrink and online shopping becomes the norm, retailers have high ambitions to sell advertising.

But that means they must contribute to Amazon’s overwhelming 77% dominance in the category, according to eMarketer. Walmart is far behind with 5% of total ecommerce ad spend in the United States.

Insider spoke to e-commerce advertising insiders about how retailers are mimicking Amazon by attacking ad dollars and how they can compete with Amazon.

Copy of advertising formats

Pay-per-click is the dominant model for e-commerce advertising, and Amazon has pioneered Sponsored Product and Sponsored Brand ad formats where advertisers pay to promote products in search results.

eBay recently added its version of a cost-per-click sponsored ad offering, called Advanced Sponsored Ads, using its data showing that 70% of purchases start with a search.

Walmart, Target, Albertsons, and Kroger are also adding new features to their pay-per-click ad formats to catch up with Amazon.

Change how advertisers pay

Retailers also copy Amazon’s ad auctions, which determines which ads serve to people based on how much advertisers are willing to pay.

There are two types of e-commerce advertising auction. In a first-price auction, the winning advertiser pays exactly what they bid. In a second-price auction, the winning advertiser usually pays a dime more than the second-bidder. Advertisers generally like second-price auctions because they keep ad prices low.

Amazon has a long history of running a second-price auction that helped the company build a great advertising business, and now other retailers are using the same playbook.

Instacart has adopted this model and is doing well, said Travis Johnson, global CEO of e-commerce agency Podean.

Growth tools for third-party sellers

Markets like Walmart and eBay started out with owner sellers providing inventory to retailers for sale. But they increasingly focus on a long line of small third-party sellers who sell items directly to people in marketplaces – similar to Amazon’s approach to sellers.

Third-party sellers also represent a great advertising opportunity for retailers.

“While it takes more relationships to manage, moving from owner sellers to third-party sellers is the real opportunity to get additional advertising money for your platform,” said Chet Butikofer, vice president of innovation at retail company Teikametrics.

But he added that it’s a challenge for retailers to develop relationships with third-party sellers, as sellers expect white-glove service from retailers that requires one-on-one relationships.

Fight data

Elizabeth Marsten, senior director of strategic market services at Tinuiti, believes that Kroger is one of the companies with the best advantage when it comes to online advertising.

The secret sauce is that, like Amazon, “They have so much data and they are building for intention,” she said. “They have a huge analytics infrastructure. They have a lot of information about general sales, whether it’s online or in-store.” She said Kroger uses this data to help advertisers achieve goals like awareness and brand building.

She added that Kroger is more niche and focused solely on advertising, while Amazon’s grocery brands – Amazon Fresh and Whole Foods – only make up a portion of Amazon’s advertising business.

Other retailers who want to compete with Amazon for ad dollars must do the same to convince ad buyers. But big retailers like Walmart and Target still haven’t figured out how to robustly present and analyze the rich data of people shopping at its physical stores, Podean’s Johnson said.

If a retailer “could crack this nut and be able to show in-store exposure and its impact online, and online exposure and its impact in-store, that would be a very powerful proposition to take on Amazon.” , did he declare.


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