All eyes are on Amazon’s purchase of bankrupt Sizmek’s ad-serving technology, signaling yet another major move by the ecommerce titan to challenge Google’s dominance in the online ad space. But Amazon’s move to up its ad-serving game is more than a power play by an individual e-commerce giant. Rather, it’s the most visible manifestation of a larger sea change within the industry, as commerce platforms position themselves to supplant online publishers in the ad game.
The passing of the torch from publishers to commerce players has been in motion for a while now, but the shift has kicked into high gear recently. We’ve seen the announcements: Walmart is acquiring ad tech in an effort to scale up its online ad business and target customers both online and offline. Target is repositioning its media network and possible acquiring Triad from WPP. Kroger is doubling down on advertising via new formats and improved customer experience.
These commerce powerhouses represent the new breed of “publishers” that could quickly rise to surpass today’s publishers both in advertising importance and in their share of the overall ad revenue pie. This includes not just ecommerce players, but also less-conspicuous players like Starbucks, Uber, and all others that boast both scale and an impressive first-party data business. If this sounds familiar, that’s because it’s nothing new. Commerce companies are emerging as the latest in a long line of non-publishers that have shifted ad dollars away from traditional publishers.
The Rise of Commerce Advertising
Commerce companies’ advantages over today’s online publishers look very similar to those of Facebook and other social platforms: They have scale, they own consumer identity, and they have massive piles of bespoke high-intent purchase data—but they also get this data through a clear value exchange enabling them to drive opt-ins. This is an important difference to social platforms—the ability to offer a product or a discount in exchange for data enables commerce to explicitly align to the coming regulatory changes for privacy.
Here’s why it’s crucial. Under both the European Union’s General Data Protection Regulations (GDPR), which took effect last year, and the California Consumer Privacy Act, due to take effect in 2020, any website operator must obtain a consumer’s consent to use that individual’s data. That means the website operator must give the consumer a reason to provide that consent in order to use data about the shopper’s behavior on a website, the first-party data that a retailer gathers from visitors to its own website.
When shoppers buy something online, they need to provide the information necessary to pay for the goods and have them shipped to their address. Consumers have less incentive to provide such personal information to a news or entertainment website.In other words, in a regulatory environment where publishers are required to obtain explicit user consent to collect first party data, commercial transactions entailing payment and the delivery of goods provide a clear incentive for the user to provide such consent.
So commerce is well-positioned to take their share of ad dollars, but it’s not all smooth sailing. They are missing very basic elements they will need to build a viable advertising business, and face concrete risks if they go about acquiring those elements in a rush. Here are the challenges they face:
They have limited ad expertise.
Ambitions with commerce are high, but without teams that understand advertising, advertisers, agencies, and the acronym soup that is digital advertising—it’s hard to make your offering stand out among all the commerce competitors that are all simultaneously shifting into advertising.It sounds simple, but human contact a missing piece at many of the commerce players. Do they speak to agencies and brands?
The ad tech industry has been working to remove humans from the ad buying process as the industry moved to programmatic, which has had the effect of merging the industry towards similar commoditized offerings. Commerce will need to do better. The sellers that adtech has shunned are the ones that can explain differentiated offerings, be consultative partners to their clients, and collaborate with them to drive their success.
They are behind in ad technology.
Commerce companies have the assets to be successful advertising players, but they don’t yet have the ad tech they will need to make it a reality. A lot of this is likely to be solved via acquisition, with Walmart’s recent purchase of Polymorph serving as a sign of things to come. Many commerce companies also lag behind in the mundane details of digital publishing, like third-party verification, reporting capabilities and agency relationships. Those things take time to build.
They can’t afford to pick the low-hanging fruit.
The reason advertisers will buy with Amazon and other commerce players will be their data. The reason they will keep buying will be performance, which commerce platforms will need to elevate via highly integrated ad formats. Clogging the user experience with ad formats that click users away from their sites and apps is akin to kicking customers out of their stores. Standard IAB formats that drive users off site might work for publishers, but they won’t work for commerce.
There is plenty of ad tech that can deliver revenue at the expense of the long-term product. Ad tech that slows the site will kill conversion on the core commerce business. Commerce companies will need to prioritize quality over tempting short-term gains.
They need to protect their first-party data advantage.
Commerce companies can’t allow their bespoke data to leach out to third parties, and that limits their options for plugging into traditional sources of programmatic demand. . Proprietary data, as obtained through a clear value exchange with the consumer is what gives commerce the advantage over traditional online publishers. Operationalizing first-party data for targeted advertising requires thorough commitment to governance best-practices and increasingly stringent regulatory requirements.
There for the taking
All of the above is in reach of today’s commerce giants, the question is: will they build these tablestake elements into their business fast enough to meet their advertising revenue ambitions?
For the most part, publishers are still at square one, with limited unique data, limited scale, commoditized low-impact display ads, and inventory that is often nothing more than a site name in someone else’s platform. It may be too late for them shift course, though. All of this requires both coordination among competing companies and resistance to the “easy” path that Google is laying out for the publishing industry.
As commerce advertising rises, it will be a race: can commerce add what they need to activate meaningful advertising businesses before publishers can solve their challenges? If history is any guide—we’re on the cusp of yet another group of companies that will shift power and dollars away from the publishing industry.
Nativo specializes in “native advertising” that fits in with the content of a website, and also provides support for other ad formats and for web-page acceleration technology.