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The snowball effect of e-commerce advertising

The practice of targeted ads has become sharper over the years. TV, Print, Radio and OOH were largely non-targeted, but online ads came up with a range of targeting options – from demographics to geographic and now a lot of psychographic factors. Google was the first one to build a sustainable advertising business on the back of targeted ads.

E-commerce platforms can enable targeting at a massive scale with higher accuracy than any other platform because they have an added layer of shopping data. Globally, e-commerce giants like Alibaba and Taobao have robust advertising businesses that are proving to be a strong alternative to the existing advertising ecosystem. But e-commerce giants have a huge set of data that Facebook and Google can’t access—namely, their own.

INDIAN SCENARIO – Set to grow at 2.2x of market growth rates

The rise of online shopping in India has lead to growth of e-commerce advertising over the last 18-24 months. Multiple players like Snapdeal, Paytm, Amazon, Nykaa, Big Basket, Myntra and Flipkart among others are starting to make a significant dent in the overall digital spends pie.

Various estimates suggest that commerce spends in India last year have already breached INR 600 crores. Given that most of these destinations are only running display ads, commerce advertising is already 35% of the display market and around 8% of the overall market.

Commerce advertising should reach around INR 2,000 – 2,500 crores by 2020 (assuming a 30% CAGR – the e-commerce rate of growth). However, major e-commerce players like Flipkart are well on their way to beat these industry estimates by a significant margin as they expand their advertiser offerings; harnessing their intent data across publishers and verticals.

As more advertisers join the advertising bandwagon on e-commerce, in the short run, they are likely to over index on ad formats in the following order:
• Display on deck – On App (Top of the page widgets, brand stories) / Desktop (Top of the page widgets, Brand story cards) will continue to grow steadily.
• Off deck advertising – In a market where all intent data available is usually directional, advertisers would want to latch onto deterministic data from e-commerce players and use that to maximize their returns. Off deck advertising in % terms should hence be the largest gainer YOY.
• PLA (Product Listing Ads) – Globally, PLA have taken the lion’s share of advertising spends.
• For companies like Alibaba, PLA would account for over 65% of their earnings from ads. In India, the PLA contribution has been below 20% as the market isn’t mature yet from both the sellers and consumers perspective.
• Brand Stores, Search and Attach – will continue to be high interest but low scale.

The two biggest categories in e-commerce, namely technology and lifestyle will emerge as trendsetters in the future. Features like haptic feedback can soon be experienced on ad platforms. While shopping for apparel, ad formats will be able to intelligently display matching ensembles. With interactive product descriptions and artificial intelligence powered data analytics, commerce advertising is looking to target both people who are surfing and exploring products along with those who have an intent of purchasing. The experience will also be curated and customised according to the user’s preferences.
Responsive design will play a big role in the growth of commerce advertising, with ads specifically being targeted to different devices. Growth opportunities will come from customising commerce ad packages that serve specific brand need which based on where they stand in the ‘Awareness’, Consideration’ and ‘Purchase’ stage. Streamlined data will attract brands to commerce ads.

Samsung wanted to increase their sales on Flipkart during the festive season, Flipkart responded with a multiple-channel plan for the brand. Samsung came on board as a platinum sponsor advertising the brand’s products on the first fold. This included the presence of banner ads called ‘Star Banners’ on the App. Flipkart divided its audience into first-time buyers, premium buyers, buyers seeking for deals and discounts and non-smartphone buyers.

The focus was on the first two categories with scenario backups for a refresh in the page banner advertisements, every 3 hours. To ensure complete success, Flipkart also advertised it on different media channels like social, radio, TV and out-of-home banners. This resulted in:
10 million page clicks (product views)
6X conversion rate (compared to historical benchmarks)
25X investment on advertising spend (ROAS)
1.2X product sales (compared to original target)
Star Banners became a resounding success and other companies soon followed similar product strategies to optimize their sales.

source: exchance4media