Amazon sales are skyrocketing. In the post-pandemic ecommerce boom, online retailers have become more critical to consumer goods brands than ever before. With Retail Media advertising costs are steadily increasing, brands will need to lean on other digital advertising channels like Paid Search & Social Advertising to remain successful—and will need cross-channel measurement in place to optimize their efforts.
The evolution of Retail Media advertising is at about the same point where Paid Search advertising was around 2005. At the time, it was being heralded as the most valuable new channel for brands. Historically, the brands that get in early with a new channel reap the most benefits.
For early adopters, Paid Search was like printing money. Around that time, I was running SEM campaigns for a few brands with click costs averaging around ten cents. For example, one of my clients imported lighting fixtures and sold them online. For a $20 daily spend, they could afford around 200 visitors a day. Eventually, they upped that investment to $50/day, or 500 visitors/day as the orders rolled in.
Even with a 1-2% conversion rate (only 1-2 orders per 100 visitors), the online store generated 5-10 orders per day. That may not sound like much, but the orders were from electricians and contractors who ordered pallet loads of light fixtures so the average order size was significant. Within months, the client scaled up its operations, hired a dozen people, and geared up for a big market push with a $100/day investment in Paid Search.
But alas, within 18 months, the bubble burst.
Every brand finally saw the Paid Search opportunity for what it was and got involved. The competition drove the auction prices up and costs for this client went from $0.10 per click to $2 per click. Simple math will tell you that the website went from 1000 visitors/day to just 50 visitors/day for the same $100 investment. Conversion rates dipped slightly too because rival companies were capturing customers from their Paid Search programs.
Unfortunately, that meant my client’s business model sank too. People were let go, warehouse contracts weren’t renewed, and so on. Luckily, the story ends on a good note as the business was able to figure out a way to continue and still thrives today.
When Biddable Ad Channels Mature, Marketers Need to Get Savvier
Why did click costs go up 1900%?
We’ve seen with the early evolution of Paid Search—and other biddable media channels like Social Advertising—that advertiser saturation peaks over time and drives up click costs. Eventually, the market is saturated, and click costs somewhat stabilize. They fluctuate, of course, but not at the shocking jumps you see pre-maturation.
I often label the moment that these biddable channels saturate as the Second Era in their maturation. The First Era is more like the Wild West, where click costs are so low, it’s hard not to have positive ROI. Engagement tends to be higher, too as the ads are somewhat a novelty and consumers are more likely to click. For example, early banner ads (circa 1997) had a clickthrough rate of 7%; now, it’s around .5%— a 93% decrease.
Retail Media advertising is going through this maturation right now and marketers will need to innovate to remain competitive.
Shopper marketing, the predecessor and offline equivalent of Retail Media, has been a mainstay of product companies for decades. CPG companies invest nearly $100 billion annually on shopper marketing programs such as in-store displays and features in retailer ads.
But here’s the difference; In any given brick & mortar retailer, space is limited, and there’s a limited number of brands and products on the shelves. On the other hand, the online retailer’s endless aisle can contain a seemingly infinite number of products. One of my favorite examples is peanut butter, where a handful of brands and a few dozen products can be found in the grocery aisle. But, search for peanut butter on Amazon, and you’ll see more than 1000+ products!
Consumer good companies can use shopper marketing tactics to draw attention to their products in stores, but the endless aisle is a different beast altogether. So for companies that rely on online retailers, Retail Media advertising has moved from “a good thing to do” to a “must do.”
The Second Era of Retail Media: Search/Social and Cross-Channel Measurement
A new era requires a new way of thinking. At Skai, we believe the way forward is Connected Commerce Advertising, a strategic approach in which other digital advertising channels are unified with Retail Media to work towards the common goal of driving sales on online retails such as Amazon.
Two of those critical channels are Paid Search and Social Advertising which can play important roles in driving awareness, consideration, and traffic to online retailers. For consumer good companies that rely on online retailers, it makes sense that a good portion of these two channel investments should be redirected away from their owned websites and to online stores to maximize transactions.
In order to optimize these programs, cross-channel measurement if required to drive optimization tactics. Amazon is the first online retailer to offer such measurement in the form of Amazon Attribution, which Skai wholly supports. With this cross-channel measurement solution marketers can gain a clear picture of how their Search and Social advertising is helping to drive sales and revenue for their products on Amazon.com.
With Amazon Attribution, marketers can optimize the traffic from Paid Search and Social Advertising to drive Amazon sales & revenue
How do you plan to remain successful in the next era of Retail Media?
No one truly knows when the full saturation of Retail Media advertising will happen. Until then, click costs will continue to rise and ROI efficiency will get harder and harder to maintain. You may be seeing this already within your Amazon Advertising programs.
With Skai, you can not just run your Retail Media programs, but also your Search and Social advertising together in one place. Add on Amazon Attribution—including Skai’s unique support—and you will be able to adjust your investments to keep your ROI on track.
Don’t wait until your Amazon sales begin to suffer to adapt to the new normal. It’s right around the corner.