March 4, 2022
7 min read
Been spending more time online shopping recently? You are not alone! It is no secret that the pandemic has accelerated online shopping, leading to a paradigm shift in consumers’ behavior. Yet, most people still might not be aware that 44% of shoppers prefer marketplaces, over search engines, as the starting point for their product searches (Pleuni, 2021). Furthermore, Catalyst and Kantar’s (2021) research indicates that e-commerce websites are the most visited pre-shop touchpoint for online consumers. Finally, in line with the report from Breen (2021), nearly half of online shoppers say that ads had a significant influence on their purchasing decision on retailers’ websites.
All of this has implications on both marketplaces and brands. For marketplaces, it is the right time to start monetizing on higher traffic by leveraging Retail Media solutions. Meanwhile, for brands, it highlights the importance of working with retail websites and marketplaces that provide these solutions because they enable advertisers to stand out on the digital shelf and target consumers near the digital point of sale.
For these reasons, let’s have a look into how Retail Media ad types such as Sponsored Product, Sponsored Brand, and Display Ads can help marketplaces and advertisers in a mutually beneficial way.
Sponsored Product Ads are promotional tools that allow vendors and third-party sellers to advertise their individual products on online marketplaces. According to JungleScout (2021), Sponsored Product Ads are the most common and effective type of pay-per-click marketing tool. Indeed, these ads are used by almost two-thirds of all third-party marketplace sellers on Amazon. Unlike other types of ads such as banner ads, sponsored products are part of native ads, meaning that they look extremely similar to organic search results and thus, provide a non-intrusive ad experience for customers.
They may appear at the beginning of the search result page, middle, next to it, or mixed further down the page, and even on rivals’ product detail pages as well.
The main advantage for a marketplace is that sponsored product ads strengthen relationships with its brands. By providing intelligent and contextual ad-serving, the marketplace enables advertisers to get greater ROIs from their platforms, making the marketplace a preferred option for them. Furthermore, they can earn new high-margin revenue by accessing lower-funnel ad budgets of advertisers.
Another benefit of sponsored listing for marketplaces is that the revenue is based on traffic and not linked to sales. In other words, marketplaces can hedge their revenue risk: even if users are not in a buying mood or situation, but simply browsing and clicking through the sponsored products, marketplace owners are still getting paid by advertisers.
From advertisers’ point of view, Sponsored Product Ads can be used to increase brand visibility given the strategic placement of the ads. By boosting their product listings, brands with insufficient traction can drive more traffic into their product pages and get discovered faster.
Having said that, this ad format is a powerful tool when it comes to lower-funnel marketing, that is conversion because its main intent is to drive sales. Sponsored Product Ads are shown near the digital point of purchase in order to convert high intent buyers into customers.
Finally, from customers’ perspective, sponsored product ads improve their experience by helping them to save time in searching for their products. Ads are placed in a way that they match shoppers’ intent and requirements, thereby, helping them to explore products that otherwise require more searching and taking extra steps such as applying additional filters, scrolling several pages, etc. Customers can also explore various deals, discounts, and offers through sponsored product ads as well.
Sponsored Brand Ads, previously known as Headline Search Ads, are banner ads that showcase a brand or store logo, custom headline, call-to-action (CTA) message, and multiple products. Similar to the previous ad form, sponsored brands ads are pay-per-click advertising that targets keyword searches; Customers can enter a targeted keyword into the search bar, and boom — ads show among the results, ready to be discovered.
The popularity of Sponsored Brand Ads has increased over the years with 34% of third-party sellers on Amazon now using this ad form, including 66% of sellers who have over $1 million in sales value.
In general, there are three types of sponsored brand ads. The first is a Product Collection that allows sellers to advertise up to three products. Then there is also Store Spotlight, featuring storefront instead of products. Finally, recently major marketplaces like Amazon have introduced a new feature that allows sellers to display video as part of the brand ads.
In terms of the location of the ads, sponsored brand ads appear within, next, or even at the very top of the search result page, and usually above sponsored product ads.
While enjoying all the benefits similar to the former ad type, Sponsored Brand Ads can bring marginally higher revenue to marketplaces. This is because Sponsored Brands have been consistently priced higher than Sponsored Product Ads.
On the other hand, this should not act as a discouragement for advertisers. The good news is that Sponsored Brands tend to have a higher click-through rate, a metric that measures how well ads are performing, in contrast with Sponsored Product Ads.
Another advantage of this ad type is that it allows brands to manage more creatives such as several pictures and even videos in creating campaigns. This offers a huge advantage over other brands that only use Sponsored Product Ads, as advanced video content can help brands stand out and increase visibility and awareness of their stores.
Moreover, in line with JungleScout, Sponsored Brand Ads offer the highest return on ad spend amongst other types of ads. In simple words, sellers would earn more revenue with Brand Ads than they would instead with Sponsored Products and Display ads.
Coming to the third and final ad type, Sponsored Display Ads are self-service advertising tools that enable brands to target and retarget shoppers both onsite and offsite with auto-generated, product-focused ads. Therefore, ads can be set up in a way to reach audiences across third-party websites and publishers. These ads tend to combine visual elements, CTA messages with a link to the seller’s landing page on marketplaces.
In addition, unlike the previous two ad types, sponsored display ads leverage interest-based targeting and demographics data in order to effectively reach the right audience at the right time.
There are a couple of targeting options for Sponsored Display Ads. To begin with, Sponsored Display Ads can be targeted based on views, allowing brands to re-engage shoppers who have viewed their products (or similar) but did not make a purchase, or who have viewed product pages that meet advertisers’ criteria. The second targeting option is based on interests, allowing advertisers to show ads to shoppers with specific interests relevant to their brands.
These ads are shown on multiple places, including home page, product detail pages, shopping results pages, or as mentioned above any affiliate third-party websites and apps.
One of the benefits of Sponsored Display Ads for marketplaces is that they allow improving shoppers’ onsite experience by providing them with highly relevant, eye-catching, yet non-disruptive ads. This is extremely important for retailers and marketplaces that need to deliver the best shopping experience in order to drive more traffic onto their platform, as well as increase the base of existing loyal customers.
For brands and advertisers, Sponsored Display ads can be utilized as a mid-funnel marketing tool in order to retarget high-intent shoppers who viewed specific products in the last 30 days.
Furthermore, display advertising is a first-party data strategy. Sponsored Display Ads are cookieless in nature and powered by clean first-party information. Through leveraging relevant first-party data such as marketplace audience and offline data, brands are able to create personalized shopping experiences, making shoppers spend more time on marketplaces and increasing the likelihood of conversion.
To sum everything up, all of the above types of ads bring immense value for both sides of the retail media ecosystem — marketplaces and brands. Retail Media Ads can help marketplaces increase their revenue streams, enhance relationships with brands and sellers, as well as attract more traffic to their platform. Similarly, these ads can help brands to employ a full marketing funnel approach to achieve higher orders: starting with generating awareness through Sponsored Brand Ads, then building consideration and conversion with Sponsored Product Ads, all the way to retargeting shoppers with Sponsored Display Ads in order to facilitate repurchase behavior. A whole world of retail media ads awaits you to unlock greater advertising potential.
Breen, P., 2022. Special Report: Shopper Behavior on Retailer Websites. [online] Path to Purchase IQ. Available at: <https://pathtopurchaseiq.com/special-report-shopper-behavior-retailer-websites> [Accessed 3 March 2022].
Catalyst and Kantar, 2022. The State of Ecommerce 2021. [online] Catalystdigital.com. Available at: <https://www.catalystdigital.com/wp-content/uploads/The-State-of-eCommerce-2021.pdf> [Accessed 3 March 2022].
JungleScout, 2021. How to Use Amazon Sponsored Brands Ads. [online] https://www.junglescout.com/blog/amazon-sponsored-display-ads/. Available at: <https://www.junglescout.com/blog/amazon-sponsored-display-ads/> [Accessed 3 March 2022].
Pleuni, 2021. Nearly half of product searches start on marketplace. [online] Ecommerce News. Available at: <https://ecommercenews.eu/nearly-half-of-product-searches-start-on-marketplace/> [Accessed 3 March 2022].
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