Lessons from the 2022 Holiday Shopping Season

Lessons from the 2022 Holiday Shopping Season

Retail

How was your holiday sales season? For many retailers, the holiday shopping season felt as close to a return to normal as could be hoped for. This does not mean everyone had a great retail season; but some of the disruptive forces from 2020 and 2021 abated, such as supply chain woes and the impact of Covid-19 on in-store shopping. Instead, retailers managed against some of the variable conditions that affect shopping every season, including the state the economy and weather conditions. Here are some major takeaways from the 2022 holiday season:

  • Economic uncertainty has influenced spend – but by how much? U.S. retail sales grew 7.6 percent during the holiday shopping season, according to a Mastercard report. This was higher than the 7.1 percent growth that Mastercard had predicted in September but lower than the 8.5 percent growth achieved in 2021. Online sales grew 10.6 percent, slightly less than the 11 percent increase last year. Mastercard attributed the lower rates to consumers’ experiencing economic uncertainty. But given just how much uncertainty is in the air right now – including an ongoing war in Ukraine and a looming recession – the slowdown was really nowhere as bad as it could have been.
  • Retailers that offered price deals did especially well. Remember in 2021 when retailers were reluctant to offer discounts and deals because the supply chain crisis had hurt their inventory levels? That’s an example of an unusual problem that abated in 2022. Inventory levels returned to normal in 2022, and retailers even experienced excess inventory – which happens just about every year. So, they offered more discounts. According to Salesforce, the average U.S. discount rate stands at 19 percent, with the global discount rate at 18 percent an increase of 6 percent globally and in the U.S. year over year. Discounts increased two weeks after Cyber Week, rising 11 percent globally year over year and 14 percent in the U.S. as retailers tried to entice last-minute shoppers ahead of the shipping cutoff window.
  • Fall sales might have caused a returns problem. In 2022, retailers such as Amazon, Target, and Walmart continued to offer holiday sales in the early fall, continuing a pattern from recent years. Cyber Week was pre-empted by sales such as Amazon’s Prime Days II and Walmart’s Deals for Days. But then returns nearly doubled the week after Cyber Week compared to the previous year and have remained high since then. Salesforce says that the surge in returns could be attributable to people purchasing gifts earlier in the season and then returning them to buy something else on discount. This data underscores how much work retailers still need to do in order to synchronizes pre-Cyber Week sales with consumers’ buying habits and sentiment.
  • Social continues to fuel online shopping traffic. After hitting all-time highs during Cyber Week, social traffic referring to retailers’ sites grew 23 percent year over during the holiday shopping season, representing 12 percent of all mobile traffic, according to Salesforce. The U.S. is leading this trend, with social traffic growing 28 percent over the first three weeks of December.

Takeaways

  • Online advertising is as important as ever. Consumers surprised analysts by spending more than predicted even during a recession. Businesses that kept their brand names and merchandise visible were best positioned to win. Retailers that scaled back their online ad spending because they feared consumers were going to spend less ended up missing out.
  • Social media advertising in particular is essential. Industry watchers have been speculating that social commerce – or the actual purchase of a product on a social app – might be ebbing a bit. But commerce resulting from advertising on social apps appears to be alive and well.
  • Retailers need to focus on value, not deals. Consumers will continue to respond to deals amid uncertainty – but retailers need to be careful. Discounted products and lower-priced alternatives to name-brand products attracted consumers. But as noted, overselling deals throughout the holiday season may have backfired on retailers when consumers returned products in their quest to find better deals than they were offered.
  • Retailers need to be nimbler with their ad campaigns. As we saw, consumers continued to demonstrate an uncanny knack for surprising retailers, in this case buying more than expected and apparently being aggressive about trading up with holiday deals. We suggest capitalizing on tools such as Google’s demand forecasts on the Insights page. This predicts upcoming trends relevant to your business so that you can adjust your budget and bidding strategy to capture spikes in demand. Additionally, use Performance Planner to understand how these changes to your advertising spend will affect your predicted clicks, conversions, and conversion values. In addition, Product-specific insights are now at your disposal at the account level in the Google Ads products tab. These insights let you spot underperforming offers, identify products with missing feed attributes and compare your bidding strategy with your top competitors’.

Contact True Interactive

True Interactive has deep experience helping clients plan and implement shopping campaigns online during all seasons. We can help you, too. We understand how to create nimble search campaigns and multi-channel ad outreach to target consumers with the right message at the right time. Contact us to learn more.

Lead photo by Kayle Kaupanger on Unsplash

How First-Party Data Helps Advertisers

How First-Party Data Helps Advertisers

Advertising

First-party data is more important to marketers than ever, according to a newly published survey by Acquia and Vanson Bourne.

The two companies surveyed U.S. and U.K. marketing executives about their growth strategies going into 2023. The study found that:

  • Marketers are creating first-party data strategies to generate insights for personalized content as web browsers prepare to phase out third-party cookies.
  • 88 percent of those surveyed say gathering first-party data is more important to organizations than two years ago.
  • But only 35 percent “strongly agree” that their organization is “fully prepared for the cookie-less future.”

The above suggests that marketers understand that first-party data is important. But they need help tapping into the value of first-party data.

First-party data is information that your business collects from customers. Examples:

  • Data tracked from visits to your website.
  • Customer feedback
  • Surveys
  • CRM data
  • Social media accounts
  • Subscription-based emails or products

By contrast, third-party data is data that your business collects from potential customers based on their browsing habits across the web. Third-party data, which is typically bought from another company, is based on third-party cookies that track consumer behavior. But privacy controls from Apple and Google are making it increasingly difficult for businesses to use third-party cookies. Apple eliminated third-party cookie tracking on its Safari browser, and Google will do the same on its Chrome browser (the most popular browser in the world) in 2024. In addition, a privacy control enacted by Apple in 2021 makes it easier for people to opt out of cookie tracking on Apple devices.

In a more privacy centric world, advertising that uses third-party data is going to be less targeted. It won’t become useless, just less effective. How can first-party data help a business, though? Here are a few ways:

  • Retarget customers. In addition to retargeting customers with ads, a marketer can use first-party data collection to send out personalized emails, for example like cart abandonment reminders.
  • Target new customers based on data you collect about your current customers. Based on data collected from your site visitors, social media following, and email subscribers, you can pinpoint other demographics and geographical locations likely to be interested in purchasing your products. You can use this \ information to build out campaigns that target fresh audiences.
  • Understand you customer’s journey. First-party data can give you insight into all the ways a customer interacts with your brand, assuming you combine web analytics with other forms of first-party data such as customer surveys and email outreach.
  • Improve the buying experience. You can identify how smoothly or problematic the conversion and purchase process is after your advertising takes a customer to your site or app. Are they clicking through? Are they completing a transaction after that? Why, or why not? For instance, are customers abandoning your site at the shopping cart?
  • Develop new products and categories. Using first-party data from surveys and questionnaires, you can identify gaps in your offering and create new products and categories to match customer demand.

First-party data does not get collected and used in isolation. Businesses can make their online advertising more effective by building campaigns based on their own first-party data and:

  • Someone else’s first-party data. For instance, Amazon, Walmart, and other retailers have been building online advertising businesses based on their own first-party data. Meta’s broad targeting ad program consists of an automated targeting approach that reportedly produces better results for Facebook and Instagram ads than more refined, more niche audience approaches  do.
  • Workarounds to third-party data such as Google’s own Sandbox, which is Google’s own effort to develop alternatives to third-party cookies. However, the Sandbox is very much a work in progress. Learn more about third-party workarounds here.

Businesses can also continue to rely on third-party data and accept less effective results. But the clock is ticking. When Google phases out third-party cookies in 2024, everyone will be entering a new world.

At True Interactive, we can help businesses improve their advertising as they transition to the use of first-party data. For instance, we know how to work with all the major platforms that rely on their own first-party data, such as Amazon and Walmart. And we can work with businesses to create more targeted campaigns based on first-party data collected from analytics tools such as Google Analytics. Contact us to learn how we can help you.

Three Takeaways from Cyber Monday 2022

Three Takeaways from Cyber Monday 2022

Retail

The numbers are in: Cyber Monday was a success. And not because inflation made purchasing volume seem bigger than what it was. No, demand fueled a big day for anyone selling online.

According to Adobe Analytics, Cyber Monday generated $11.3 billion in sales online. This is 5.8 percent more than consumers spent on the same day last year and a reversal of fortune. Consider that in 2021, Cyber Monday generated $10.7 billion, which was actually a drop from 2020. Meanwhile, Salesforce said Cyber Monday online sales hit $12.2 billion in the United States, representing an 8.3 percent increase over 2021.

Cyber Monday SalesAll told, about 196.7 million shoppers made purchases during the five-day holiday period from Thanksgiving Day through Cyber Monday known as Cyber Week, the National Retail Federation said on Tuesday.

Adobe said that the Cyber Monday figures were based on more transactions overall – not spend boosted by inflation. At the peak, people were spending $12.8 million per minute on Monday.

According to Adobe, top sellers included games, gaming consoles, Legos, Hatchimals, Disney Encanto, Pokémon cards, Bluey, Dyson products, strollers, Apple Watches, drones, and digital cameras. Toys as a category saw a 452 percent boost in sales versus a day in October.

Wait a minute. Wasn’t this the year when inflation-wary shoppers were going to rein in their holiday spending? Wasn’t this the year when Amazon’s Prime Day I and II, Walmart’s Deals for Days, and Target’s virtual Black Friday sales throughout November were going to cannibalize Cyber Monday sales?

Not so fast. As it turns out, consumers were spending during the holiday promotions before Cyber Week but also holding out for deals – as they always do. And they did something else: they did their homework. Consumers knew that retailers were carrying excess inventory after two years of experiencing inventory shortages. They knew the deep discounts were going to happen. And so, they waited. As Tech Crunch reported, “Deep discounts — retailers perhaps anticipating needing to have something more to lure shoppers — have played a big role, too, as have the sheer availability of goods after shortages of the years before.”

Vivek Pandya, lead analyst, Adobe Digital Insights, said, “With oversupply and a softening consumer spending environment, retailers made the right call this season to drive demand through heavy discounting. It spurred online spending to levels that were higher than expected, and reinforced e-commerce as a major channel to drive volume and capture consumer interest.”

In addition, mobile influenced Cyber Monday shopping, accounting for 43 percent of all online sales. But it should be noted that the 43 percent share was much lower than Thanksgiving Day, when mobile accounted for 55 percent of purchases. That’s because people are back to work in Cyber Monday and using their desktops more.

So, what can retailers learn from the results?

  • The retailers that stayed committed to their online ad spend won. By keeping their brand names and merchandise visible, they were best positioned to capture the Cyber Monday traffic. Retailers that scaled back their online ad spending because they feared consumers were going to spend less ended up missing out.
  • As always, a strong blend of desktop-based and mobile ad spend was key to winning Cyber Monday traffic. True, the mobile traffic fell from Thanksgiving Day, but 43 percent is still a sizable number, and a well-balanced ad strategy was the way to go.
  • Winning Cyber Monday requires a strategy for winning Cyber Week. Demand was uniformly strong for the entire period of Thanksgiving to Cyber Monday. Advertisers that managed their budgets with an eye toward driving traffic and sales for the entire Cyber Week captured a “Cyber Monday bonus.”

Bottom line: if you kept your holiday advertising strong and ignored the naysayers, you won Cyber Monday.

Contact True Interactive

True Interactive has deep experience helping clients plan and implement holiday shopping campaigns online. We can help you, too. We understand how to create nimble search campaigns and multi-channel ad outreach to target consumers with the right message at the right time. Contact us to learn more.

Lead image source:
https://pixabay.com/vectors/cyber-monday-neon-sale-ecommerce-5240883/

Why Walmart Connect Expanded Its Advertising Partnerships

Why Walmart Connect Expanded Its Advertising Partnerships

Walmart

As the 2022 holiday season kicks into high gear, retail analysts are watching closely how much consumers will spend during a time of inflation. But it’s equally fascinating to understand how people shop. Walmart Connect, Walmart’s fast-growing advertising arm, believes that holiday shopping online – indeed all shopping online — will increasingly happen via social media, television commerce (t-commerce), and livestreaming. That’s one reason that Walmart Connect has expanded its advertising partner program to encompass social apps such as TikTok and streaming platforms such as TalkShopLive.

What Is the Walmart Advertising Partner Program?

Walmart Connect wants to help businesses advertise across the digital world beyond Walmart.com. To do that, Walmart Connect’s partnership program works with platforms to help brands scale, automate, and optimize their Walmart Connect advertising. These include partners that make it possible for Walmart Connect to expand self-service advertising through an application programming interface (API). Those API partners can be found here.

The partnership program is becoming more important to Walmart as it positions itself as a strong retailer-based ad platform alternative to Amazon Ads. And Walmart says the program is increasingly delivering value. For example, when BirdRock Brands turned to Pacvue (an enterprise software suite for eCommerce advertising) to scale its manual Walmart Sponsored Products campaigns, BirdRock was able to help design a campaign that ultimately experienced a return on ad spend 11 percent greater than its target, and an 83 percent increase in sales quarter over quarter.

What Did Walmart Announce About Its Advertising Partner Program?

Walmart has added a slew of advertising partners known as innovation partners. According to Walmart, these innovation partners will provide test-and-learn opportunities with formats such as social, entertainment, and live streaming throughout the entire holiday season. The newly expanded offering includes additional touchpoints and channels to reach customers wherever they are with new ad formats:

  • TikTok: this partnership provides an opportunity for advertisers to connect with potential shoppers on the red-hot TikTok platform. As Walmart noted, more than 50 percent of TikTok users say they watch ads on their feed instead of scrolling past them. The first-to-market pilot between TikTok and Walmart Connect will provide advertisers with the opportunity to serve in-feed ads on TikTok. This will leverage TikTok’s sound-on full screen video format together with Walmart Connect’s targeting and measurement.
  • Snap: the partnership with Snap enables advertisers to buy ad units including augmented realityCollection Ads and Snap Ads through Walmart Connect and take advantage of the Walmart Connect’s geo-based measurement. This is the first time advertisers can buy Snap ad units through Walmart Connect and get in front of the unique Snapchat audience (75 percent of 13-34 year-olds in the U.S.), who hold over $1.9 trillion in spending power.
  • Firework: this partnership enables supplier-funded shoppable livestreams and short shoppable videos on Walmart.com/live. Walmart Connect is testing how brands can leverage Firework’s capabilities to create premium, engaging, mobile-first video experiences and, to start, has partnered with Johnson & Johnson and Procter & Gamble.
  • TalkShopLive: Walmart Connect is expanding its relationship with TalkShopLive to partnership enable supplier-funded shoppable livestreams on Walmart.com/live, TalkShopLive’s platform, brand and publisher sites, as well as across the web. Walmart Connect is testing how brands can amplify their content and connect with shoppers at scale. To start, it has already executed livestreams with Johnson & Johnson, Procter & Gamble, and Samsung, among others.
  • Roku: Walmart wants to help make TV streaming the next e-commerce shopping destination. Walmart touts Roku as America’s Number One TV streaming platform (citing Hypothesis Group research). So, Walmart has become the exclusive retailer to enable streamers on Roku to purchase featured products and have the transactions fulfilled by the chain. Walmart Connect will connect brands to customers through the Roku platform, and checkout will be seamless for customers, while advertisers receive insights on effectiveness via Walmart Connect measurement.

In announcing these partnerships, Walmart discussed how online search and shopping has become more diversified especially in the post-pandemic age. Seth Dallaire, Executive Vice President and Chief Revenue Officer, Walmart U.S., wrote in a blog post:

Consumers who turned to online shopping during the pandemic have chosen to stay there, with those returning to in-store relying on online research to guide their decisions. Consumers realized the importance of “connection” and were forced to adapt and connect in new ways including social feeds, livestreaming, mobile and more, specifically across video and connected TV. In fact, the predicted growth of social commerce from 10% of all e-commerce to 17% by 2025 will be driven by Gen Z and millennial consumers and nearly two-thirds (64%) of social media users — an estimated 2 billion social buyers — said they made a purchase on social media in the past year.

Now, Walmart Connect intends to do its part in connecting social media discovery to actual sales. So far, Walmart Connect’s partnerships have been hands-on in nature. Brands get custom reporting about their campaigns, based on activations on Walmart.com’s live shopping, TikTok, Snap, and Roku. But Seth Dallaire told Advertising Age that the partnership program expanding to the point where it would be more automated and widely available within Walmart Connect, so that brands could better target ads on social media and connected TV.

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here and our Walmart Connect expertise here.

For Further Insight

Why Walmart Connect Is Winning,” Tim Colucci, February 25, 2022.

Why Retailers Are Launching Ad Businesses,” Tim Colucci, January 11, 2022.

Walgreens Doubles Down on Its Advertising Business,” Tim Colucci, May 19, 2021.

Amazon Unveils New Ad Units Across Its Ecosystem,” Kurt Anagnostopoulos, May 4, 2021.

Why Macy’s Launched an Advertising Platform,” Tim Colucci, March 3, 2021.

Walmart Asserts Its Leadership in Advertising,” Tim Colucci, February 8, 2021.

Advertising in the Metaverse

Advertising in the Metaverse

metaverse

What will advertising in the metaverse look like? Gaming platform Roblox platform recently provided an answer by previewing a new advertising format, Immersive Ads. Immersive Ads make it possible for businesses to build 3D portals, where players of games on Roblox can be transported to customized virtual words. Because Roblox is considered to be one of the platforms shaping the future of the metaverse, Immersive Ads are significant and worthy of closer attention.

A Refresher: What Is the Metaverse?

The metaverse refers to an interconnected digital world where people and businesses exist through avatars. In the metaverse, avatars do everything from attend business meetings to buy goods and services using digital currencies. The term was coined decades ago in Neal Stephenson’s 1992 science-fiction novel Snow Crash. Aspects of the metaverse are here already. In fact, Linden Lab launched an early version of the metaverse in 2003, Second Life, which was too far ahead of its time to gain a widespread breakthrough. But gaming platforms such as Fortnite and Roblox, where people hang out via avatars, are metaverse environments, and they have become enormously popular – they’re just not connected yet. And businesses have quickly set up shop on the metaverse. In Roblox’s virtual world, for example, a digital-only Gucci bag sold for more money than the bag would have netted in the physical world. And Walmart recently launched a metaverse environment in Roblox to sell toys to kids.

What Did Roblox Announce?

Businesses are still in the early stages of actually advertising inside the metaverse, but Roblox gave a strong glimpse at how ads will work. At the Roblox Developers Conference (RDC), the company previewed Immersive Ads, which will be launched in 2023. According to Roblox, this is an innovative 3D advertising experience that will be clearly labeled as such and will be native to the platform. Brands and developers will be able to build new ad experiences on Roblox, including portals that can seamlessly transport users back and forth between experiences. This will create new opportunities for developers to generate revenue and enable brands to reach their communities more effectively.

The video below shows how Immersive Ads will work. In the video, a Roblox character approaches a 3D portal to Vans World, which is a  virtual skatepark that Vans launched in 2021. The portal is adorned with Roblox Vans World posters. A video previewing the experience and bearing a “Sponsored” disclosure plays on a screen overhead. An avatar steps through the portal where it is transported to a branded space.

 

The experience is really not that different from how brands advertise on gaming sites, with digital signage adorning metaverse living spaces just as signs and posters do in the physical world.

According to Richard Sim, senior product director for monetization at Roblox, “If you have a bus stop or like the side of a building, you can apply that image ad to the side of the building, and it’ll just render the right creative to the right user at the right time.”

Walmart Offers New Possibilities

The opportunities for brands can become very targeted as in the above example or more immersive, which is what the new Walmart metaverse experiences promise.

Walmart’s immersive experiences – Walmart Land and Universe of Play – are virtual playgrounds where Walmart will be able to advertise toys to families. Inside Walmart Land and Universe of Play, a variety of minigames and experiences await, including a Ferris wheel, interactive piano walkway, and DJ booth. These experiences connect people (their avatars, actually) with different brands. A virtual dressing room lets you spend coins collected in Walmart Land to adorn your avatar with Skullcandy headphones or a Fitbit fitness tracker. In Universe of Play you can race Razor scooters round a track or hang out with PAW Patrol characters.

Technically there is no advertising yet in Walmart Land and Universe of Play although it’s possible for avatars to buy merchandise via tokens earned through various games. But it’s hard to imagine Walmart not capitalizing on advertising opportunities through Walmart’s fast growing advertising arm, Walmart Connect. Stay tuned!

Lessons for Brands

  • Immersive Ads show how brands can advertise and how Roblox will grow as a platform. Roblox will earn money by charging brands to create Immersive Ads, while businesses such as Vans will advertise and sell virtual goods (many brands are doing the latter already). The ads on Roblox may not be as immersive as many might expect, but Roblox is likely trying to avoid spamming its gaming community.
  • Businesses should always remember their audiences before diving into advertising on the metaverse. How attuned is your audience to immersive worlds such as the metaverse? Is marketing and advertising in the metaverse a good fit for them? Currently, the biggest audience for the metaverse skews young: Gen Zers who have grown up gaming and for whom the intricacies of a virtual world are already familiar. But some brands are addressing this divide by reaching out directly to an older cohort. Roblox, for example, has developed features to appeal to older users. And so, the attendant question to ask yourself is: do you have the energy and resources to think outside the box and woo your audience, no matter what generation they inhabit?
  • Assess your appetite for experimentation. This is a brave new world that’s constantly changing. How comfortable are you with that dynamic?
  • Learn from businesses that have been getting involved in advertising and marketing in immersive gaming worlds, which are, as noted, extremely popular in the metaverse. A really good example consists of brands that have been embracing in-game ads, as we blogged here.

Contact True Interactive

True Interactive knows how to make online advertising deliver measurable results on all platforms and apps. To learn how we can help you, contact us. Learn more about our services here.

Where Amazon, Google, and Meta Are Headed

Where Amazon, Google, and Meta Are Headed

Amazon Google Meta

Technology earnings week is always watched closely. The rising and falling fortunes of Alphabet (Google), Amazon, Apple, Meta, and Microsoft have a direct impact on adjacent industries such as retail, advertising, and marketing. During a topsy turvy year such as 2022, the most recent quarterly earnings announcements of the Big Tech firms were followed especially closely. And here are some of the highlights from the Big Three of online advertising – Amazon, Google, and Meta — with implications for online advertising:

  • Amazon beat analysts’ estimates and enjoyed a strong quarter with the exception of its core retail business. The big news was the continued strong growth of Amazon Ads, which is Amazon’s advertising business that has quickly challenged Google and Meta for leadership of the online ad market. Ad revenue climbed 18% in the period for its most recent quarter. All told, Amazon Ads raked in $8.76 billion in the second quarter. Notably, in its earnings announcement, Amazon highlighted the recent launch of Amazon Marketing Stream, which “automatically delivers hourly Sponsored Products campaign metrics to advertisers or agencies through the Amazon Ads API.” This is a sign that Amazon is developing ad tech data and marketing services, which is a direct challenge to Google. What it means: the success of Amazon Ads dovetails with the ascendance of a more privacy-focused era. Apple in particular has initiated privacy controls that make it more difficult for advertisers to target consumers with ads that use third-party data. Amazon Ads is beyond the reach of such privacy controls because Amazon Ads is based on first-party data that Amazon collects from its customers. Amazon is not the only retail business building its own ad network. But it’s the leader. We expect more businesses will choose Amazon Ads as an advertising platform, and we have developed services accordingly.
  • Meta suffered its first-ever revenue drop for the quarter. The reasons are complicated. First off, TikTok is threatening the popularity of Facebook and Instagram (both owned by Meta), and Meta’s response to TikTok, Reels, doesn’t generate money as efficiently as Instagram Stories and the main news feed. Meta has also reeled from the impact of Apple’s privacy controls. What it means: Meta is in a time of transition – but never count out Meta. The company is investing heavily into the emerging metaverse, which is dragging its profits down but may boost Meta over the long run. And although Reels are a work in progress, progress is being made. As analysts at JMP wrote, “With Meta making progress with Reels while AI improves recommendations across content and advertising, we expect growth to rebound from current levels while the company is more disciplined in its cost structure.” And, overall, the company’s base of monthly active users continues to increase. The real threat to Meta in the near term: how well the company can rebound from the threat of Apple’s privacy controls. The long-term threat: how well Meta can attract and keep Gen Z users.
  • Google is sitting pretty. Alphabet’s search ad sales grew more than 13 percent in Q2 2022 to $40.7 billion, beating analysts’ expectations of $40.2 billion. Search, of course, is Google’s bread-and-butter business, and Google’s investments into its core search ad units are paying off as advertisers lean into performance marketing tactics amid economic uncertainty. But life isn’t all rosy at Google. At YouTube, ad sales rose 0nly 5 percent after jumping 84 percent in the same period a year ago. This reflects the impact of TikTok’s popularity. What it means: Google is going to flourish in 2022 and 2023 especially as advertisers weather economic uncertainty. Google is a safe bet, and Google continues to develop new ad units that enhance its performance marketing capabilities. Watch for Google to continue to push artificial intelligence-related services and tools that automate online advertising — while managing the increasingly thorny challenge of developing alternatives to third-party cookies, which the company had said it would do by 2022 and now is rescheduling for 2024.

What Advertisers Should Do

  • Keep a diversified ad portfolio across the Big Three: Amazon, Google, and Meta. If you are satisfied with the results you are seeing, don’t let Meta’s challenges scare you away. But do a gut check with your agency partner on how your ads are performing.
  • Work closely with your agency partners to understand the impact of privacy controls, especially from Apple.
  • If Gen Z is an important audience, take a closer look at TikTok. TikTok looms large as it challenges YouTube and Meta especially.

Contact True Interactive

To succeed with online advertising, contact True Interactive. Read about some of our client work here.

Streaming Services Embrace Ads: Advertiser Q&A

Streaming Services Embrace Ads: Advertiser Q&A

Advertising

Netflix sparked one of the biggest stories in the ad tech industry in April when the streaming company announced it was going to embrace advertising. This move was long anticipated from industry watchers who wondered how long Netflix could satisfy investors and recoup the costs of content creation based on subscriber growth alone. Well, Netflix finally relented after distancing itself from ads. That’s because Netflix’s subscribers are not growing at the rate Netflix once enjoyed when the company was challenged by few competitors. In its first quarter of 2022, the company actually lost subscribers. But Netflix is not the only company adopting an advertising-supported tier. Disney+ will also adopt advertising in 2022. The two platforms join streaming companies such as Hulu and HBO Max in doing so. Here are some questions advertisers might be asking:

Will people who subscribe to Disney+ and Netflix start seeing ads with their current plans?

No. Both Disney+ and Netflix have made it clear an ad-supported plan will cost less than the ad-free plans that exists now.

Netflix CEO Reed Hastings recently told investors, “If you still want the ad-free option, you’ll be able to have that as a consumer. And if you would rather pay a lower price and you’re ad-tolerant, we’re going to cater to you also.” Disney Chief Financial Officer Christine McCarthy said the same about Disney’s plans.

Why are Disney+ and Netflix running ads?

The obvious answer: advertising brings in revenue to offset the costs of content creation. But advertising also gives audiences more options. Recently, Hulu revealed that 70 percent of its viewers were on ad-supported plans with the remainder on the pricier ad-free tiers. Both Disney and Netflix expect that audiences will respond to having both an ad-free and cheaper ad-supported option.

“Based on our Hulu experience, we actually have more AVOD [ad-supported video-on-demand] than SVOD [subscription VOD] subscribers,” Christine McCarthy of Disney said, speaking at the 9th Annual MoffettNathanson Media and Communications Summit. “We expect about the same percentage for both Disney+ and Hulu, just based on the experience curve that we’ve witnessed.”

Reed Hastings of Netflix also cited Hulu’s success when he unveiled Netflix’s plans to investors. Hastings specifically called out Hulu as proof that ads are working for video subscription services: Hulu ended 2021 with 40.9 million paying subscribers, up from 35.4 million a year ago.

When do ads come to Netflix and Disney+?

Disney plans to launch an ad-supported plan in 2022 at some point; although Netflix has not specified a timeline, a leaked internal memo from Hastings indicated that an ad-supported plan could be coming before the end of the year.

What will the ads look like?

At the MoffettNathanson conference, Rita Ferro, president of Disney Advertising Sales, said that the Disney+ ad-supported tier will start with 15- and 30-second spots, but will expand to a “full suite of ad products” over time. The ads will have an average of four minutes per hour, which is fewer ads than at Hulu. That’s partly because 65 percent of viewing on Disney+ is movies, which has fewer ad breaks than series.

According to Variety, the ad-supported version of Disney+ will not accept alcohol or political advertising at launch, nor will it run ads from rival streamers or entertainment studios.

Nothing is known yet about Netflix’s plans. But since Netflix cites Hulu as a model for successful advertising, Hulu’s own ad units are worth learning more about. And there are many of them. Here are a few:

  • Standard video ads appear as a commercial break during the streaming of any of Hulu’s full episodes. Such ads can also appear as a pre-roll for clips hosted on distribution partners of Hulu or as companion banners.
  • Binge ads let advertisers deliver contextually relevant messages to the audience during a viewer’s binge session. These ads help businesses to engage with audiences in a non-disruptive way. Binge ads are for viewers who have watched three or more shows of the same series.
  • Sponsored Collection brand placements gives advertisers extended ownership of a collection sponsorship through logo placement adjacent to content in Hulu’s UI across devices.
  • Hulu’s Pause Ad is a non-disruptive, non-intrusive user-initiated ad experience that appears when a viewer presses pause when watching content.
  • The Ad Selector allows the user to control their ad experience by choosing the ad they want to see. The user will be presented with two or three video options. Once a selection is made, the user will be presented with the commercial of their choice. If no selection is made after 15 seconds, one video in the unit will be randomly selected to play.

Hulu shares its ad units in more detail here.

Netflix is renowned for using analytics to personalize content for its audiences around the world. Its own ad units may skew toward the Ad Selector option cited above, tailored to global audiences. But the company will need help.

“Netflix already has a trove of first-party data that can deliver a variety of audience segments for advertisers, and relevance for consumers,” said Adam Helfgott, CEO at MadHive, the programmatic ad tech firm. “In order to sell that inventory in context with TV overall for advertiser objectives, they will need to integrate into the ecosystem and partner with DSPs, SSPs, and infrastructure providers.”

Netflix may also step up product placements in its shows such as Stranger Things. Netflix has not really actively monetized product placements even though its shows are not shy about integrating real products into their plotlines, as Stranger Things does with businesses ranging from Cadillac to Eggo.

Meanwhile, competitors Amazon Prime Video and Peacock will literally drop products into actual shows. These received less attention than the news from Netflix from Disney+, but they are also intriguing. At the 2022 NewFronts, Amazon and Peacock demonstrated new ad formats that use similar virtual product placement (VPP) tools, a post-production technique for inserting a brand into a TV show or movie scene.

Amazon’s VPP tool, operating in beta, lets advertisers place their branded products directly into streaming content after they have already been filmed and produced. Peacock’s new “In-Scene” ads will identify key moments within a show and digitally insert a brand’s customized messaging or product post-production so that the brand is showcased in the right TV show/movie and at the right time. These function very similarly to in-game ads.

It’s going to be an interesting and exciting year for advertising.

What should advertisers do?

  • Understand the growth of advertising on streaming platforms in context of the rise of connected TV. If you’ve not done so already, take a closer look at why connected TV is growing and how it could expand your audience. (True Interactive can help you with that.) Connected TV is enjoying 60-percent growth, driven by a public’s appetite for streaming that continues unabated, Netflix’s slowdown notwithstanding.
  • While you await more clarity on available ad units, get to know the audiences on each platform. Which is right for your brand?

Contact True Interactive

True Interactive can help you navigate the connected TV landscape. Our services range from media strategy and planning to automated performance reporting. Learn more about our services here, and contact us to learn more.

Photo by Souvik Banerjee on Unsplash

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