Getting ahead of the competition on marketplaces, such as eBay or Amazon, isn’t the same as it used to be. These big ecommerce platforms are major sources of revenue for many sellers. However, the rules of the game have changed.
The reason for this is first of all the fact that the battle for customer attention becoming fiercer than ever before. Secondly, both eBay and Amazon are looking for ways to increase their revenue through advertising. In consequence, the marketplace model is changing with the paid search starting to dominate the digital landscape.
Paid search click volume is seeing a substantial growth globally; 13% YoY increase, according to Marin Software’s Q2 2019 Digital Advertising Benchmark Report. Further, a 40% ad spend increase is recorded in ecommerce advertising with Amazon maintaining its healthy lead.
The bottom line is: marketplace sellers need a stronger and smarter advertising strategy.
This article will give you insights and tips with regard to:
- The evolution of the marketplace model and its effects on online sales.
- The new ecommerce advertising reality and how sellers can adapt to it.
- The most effective ways of staying ahead of the ever fiercer competition.
The Evolution of The Marketplace Model
Up until recently, paying selling fees meant that sellers could expect satisfactory visibility of their products. However, today paying such fees is unlikely to guarantee the same result.
The current marketplace model shows a changing dynamic: one that’s shifting from organic towards paid search. ‘A good example is eBay: in popular categories, more than 50% of the first page of search results are sponsored products. This includes the first 5 search results that are getting the most clicks’, says Patrick Smarzynski, Co-founder of Webinterpret, with almost 20 years’ experience in ecommerce.
‘eBay Advertising is becoming one of the platform’s top priorities,’ Patrick continues. ‘As a result, eBay is seeing substantial revenue growth. Currently, eBay has over 800,000 sellers promoting over 200 million listings (YoY revenue growth of 110%)’, he adds.
Amazon’s advertising business is growing at a rapid pace too. US advertisers are estimated to spend $10.92 billion on Amazon’s platform in 2020.
‘Amazon is now the third-largest digital advertising platform in the US after Google and Facebook. According to eMarketer, Amazon accounts for almost 9% of US digital spend in 2019, which is a great increase from 6.8% in 2018’, Patrick points out.
Google, is still by far the largest digital ad seller in the world in 2019 (31.1% of worldwide ad spending, $103.73 billion), followed by Facebook ($67.37 billion in net ad revenues), Alibaba ($29.20 billion) and Amazon ($14.03 billion).
In general, digital ad spend is forecast to make up almost 65% of total media ad spending by 2022. The obvious fact is: advertising and promotions are playing a bigger and bigger role on ecommerce platforms.
How Advertisements Influence Organic Search on Marketplaces
‘There’s a definite connection between ads and organic search. For example, Amazon wants to prioritize the products that are likely to sell the most. Such products have good sales and feedback history. So when sales and the amount of feedback improve, products climb in organic rankings,’ says Patrick.
The truth is that advertising and Amazon search engine optimization can work together to increase sales. This means that when a product ranks better, depending on the competition, you can reallocate ad investments to other products and other keyword phrases.
The Opportunities of The Growing Ad Business in Ecommerce
‘Today you definitely need ads to have satisfactory visibility and conversions. It’s not a matter of ‘if’, it’s a matter of ‘when and how’,’ according to Patrick.
‘As platforms are scaling up investments towards commerce advertising, a host of new marketing opportunities arise, e.g. reducing the sales cycle, improving brand awareness, visibility, etc. For example, eBay’s Promoted Listings claim to boost visibility by over 30%’, he continues.
Ads can also provide invaluable insights into changing consumer habits and the best ways to acquire customers today. Ecommerce sites have tons of shopping journey data about who your shoppers are and how they make their purchases, e.g. the actions shoppers took after seeing ads or whether they actually converted.
Such data holds a key to designing successful ad campaigns and targeting at scale. So, on Amazon, you can target based on real shopping and buying data, not just demographics and interests. eBay’s data also captures buying intent signals, shopping insights, and transaction-level data, which in turn enables brands to optimize their campaigns to reach a more targeted audience.
Overcoming The Advertising Challenges
eBay and Amazon belong to the biggest marketplaces, but also the most competitive. To add to this, paid marketing campaigns tend to reach a plateau in a given market over time. Meaning that acquisition costs can significantly go up without adequate return on investment.
‘To overcome any potential challenges, I’d recommend an advertising plan created in a conscious and data-driven way. To save your time and money, I’d advise against advertising your product to everyone, everywhere,’ says Patrick.
‘By the same token, I recommend flexibility, adaptability, and willingness to test what works and what doesn’t. For example, you can test different ad types, e.g. sponsored products, products promoted in cart or at checkout, featured vendor profiles on the main page and so on,’ he admits.
A good opportunity is to test new markets, especially those that have lower competition and can offer low CPCs (cost-per-click) and better return on advertising spend.
Webinterpret’s ecommerce solution helps sellers leverage ads in different international markets. As the company has access to data and vast ecommerce knowledge and can help merchants tap into their actual sales potential to achieve the best possible ROI.
What’s The Marketplace of The Future?
In 2021 consumers worldwide will spend up to $4.8 trillion online. The rise of ecommerce will continue to drive digital ad spend across the globe. Sellers must adapt to this reality in a smart way.
‘The marketplace of the future will be even more competitive, especially in established markets. Thus, sellers will have to look for alternatives in markets where it’ll be easier to compete. As a consequence, selling globally will simply become a must to be able to compete and to benefit from economies of scale,’ suggests Patrick.
This post contains valuable insight from one of our advertisers. For an explanation of our Advertising Policy, visit this page.