One of the most important trends in advertising right now is the rapid growth of ad businesses stood up by non-advertising companies.
The OG of this category is Amazon. The online retailer has shown ads can be a high-margin addition to the bottom line, boosting profit without heavy upfront investments for any business with valuable data and real estate for potential ads in an app or site.
It came as no shock when Instacart, the online grocery delivery platform and an Amazon Fresh competitor, launched a self-service ad platform last year. Or this year when buy now pay later (BNPL) services Klarna and Afterpay, which offer installment-style payments for ecommerce, started testing in-house ad networks powered by their financial data. Uber is also investing heavily in its ad business, including the recent hire of Mark Grether from Amazon Advertising.
Another thing each of those companies has in common: They’re unprofitable. Advertising offers a bridge to profitability, since ad revenue can be earned with relatively little hiring and without acquiring new users.
Here are some of the businesses and categories that embraced ad revenue, and how they approach advertising.
The grocery game
Instacart was a fast follower of Amazon into the ad business. That’s hardly a surprise, considering it works with many of the same retail trade marketers bringing their promotional budgets online, rather than coupons campaign and in-store displays. Instacart also poached Amazon’s ad tech leader, Seth Dallaire, as its CRO.
Instacart’s financial info isn’t public, but the company lost more than $300 million in 2019, and had its first profitable month last April, when so many new customers tried online grocery during quarantine, The Information reported last year. But even with the unforeseen surge in orders, Instacart turned only a $10 million monthly profit; and since it needed to hire thousands more delivery workers to meet demand, that profit number wasn’t sustainable without further investment.
Instacart raised more than $2.7 billion from venture capital investors, but it’s an extension of retail grocery, known for high costs and low margins. Products often have a profit margin of only a few percent points. Unlike the easy scalability of a software platform, Instacart must hire gig workers to match sales growth. To grow sales, Instacart must either convert new customers or replace more and more of their store visits. But user acquisition and retention are expensive propositions right now.
Instacart isn’t the only delivery service pivoting to ads. GoPuff, a one-hour delivery service for convenience store goods, launched an ad platform this year.
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Buy What You Know
Shopify and Roku announced a partnership to bring a Roku app for CTV ad creation and campaign management to the dashboard of all Shopify merchants. The idea is to crack into the $16.4 billion that small and medium-sized businesses spend on local TV ads, Insider reports. It’s unclear whether Shopify’s customer base overlaps considerably with businesses that spend on local TV ads, as opposed to ecommerce brands. But many Shopify merchants likely are lukewarm on CTV advertising, because it’s expensive relative to video CPMs and is a fragmented, unfamiliar market. "You don't know who to trust and there's a lot of clutter," said Jesse Math, VP of advanced TV at the performance agency Tinuiti. "So having the confidence you're spending your money in the right places and in the right way can be a barrier to entry." AdExchanger has more on Shopify’s platform partnership streak, adding TikTok, Facebook, YouTube, Snapchat and more.
News You Can Zeus
Zeus Technology, The Washington Post’s ad tech unit, launched an ad network pooling inventory from the Post and publishing partners such as the Dallas Morning News and Graham Media Group, an affiliate TV station owner. Zeus has 125 clients, so there’s low-hanging fruit, but local news outlets are past ripe. Joy Robins, the Post’s revenue chief, tells Axios the ad network could propel Zeus to nine-figure ad revenue next year. The goal is to have a dozen publishers in the network this year and 100 within a year. And the pricing will be a flat $9 CPM – add an extra $1 for audience targeting parameters. Those rates are higher than Google or Facebook, typically, but lower than publisher-direct deals. It’s hard to imagine a local news ad network earning nearly $100 million next year (BuzzFeed earned $321 million in 2020, for comparison’s sake), but it’s the logical, looked-for next step for Zeus Technology. Vox Media launched an ad network last year. And while there aren’t huge revenue gains in local news sites, being the best-in-class news publisher ad network is a long-term priority, as advertising IDs consolidate.
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Now that the drama has died down around the merger process between The Stagwell Group and MDC Partners – the two finally became one in August – Stagwell, as the new entity is being called, has its eye on cracking into media.
The Stagwell Media Network was born in August as the combination of eight agencies in the group, including Media Kitchen, GALE, Grason, Assembly and ForwardPMX (the latter two of which were combined into a single agency in mid-September).
Together, the media agencies in Stagwell’s network manage nearly $5 billion in spend, says CEO Mark Penn on this week's episode.
Media was “one area where we really needed to put things together,” Penn says, noting that the individual agency brands are still pitching their own business.
“But together, we can go out and win some very significant media contracts,” he says. “Because of our combination of creative and data … some accounts that might have gone to a creative-only agency want much closer synchronization with media and targeting.”
Which is a little ironic, considering all the effort that the marketing procurement folks have put into scouring the supply chain.
“What procurement spent a decade separating,” Penn says, “many clients are looking to put back together again.”
Also in this episode: What the name “Stagwell” refers to (it’s not a person); cross-agency collaboration; what it means to be a “challenger holding company” and what the heck it even means to be a holding company at all anymore. Plus: Penn’s secret love of esoteric cartography and its unlikely connection to marketing.
"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Rekha Gibbons, Head of Multicultural Marketing & COO of Raare Solutions.
According to the US Census Bureau, by the year 2045, the minority population of America will become the majority. The historical white majority will be surpassed by minority segments of Black, Hispanic, Asian and multiracial groups. Brands who realize this paradigm shift can seize massive opportunities to engage with the “new face” of the American consumer.
And yet, even though one out of three consumers in America is multicultural, only 5.2% of marketing spend is directed toward them. This is despite forecasted spending power exceeding $1 trillion for Black, Hispanic and Asian populations.
How do brands navigate this impending shift in consumerism? For starters, acknowledge the opportunity. Improving cultural segmentation allows a brand to connect and communicate with consumers based on signal and behavior-based data.
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Gotta Spend Money To Spend Money
Amazon’s ad business is blowing up. You probably knew that already. But that growth for Amazon isn’t a win for many sellers, particularly the early power users on the platform. There is heavy demand for Amazon inventory, with the average cost per click jumping from 86 cents a year ago to $1.27 today, the Amazon agency Canopy tells CNBC. Amazon is opening up huge new swathes of inventory as well. In the past three years, sponsored product ads have gone from 20% of Amazon’s top search result space to more than 40%. But the rates are still going up. And the added inventory is a boon for bigger, legacy store brands, which can box out independent sellers on the platform. Not to mention Amazon aggregator companies that scoop up niche brands and operate their ecommerce advertising. “They’re going from competing against other, smaller sellers to now competing against massive and well-funded sellers,” says Juozas Kaziukenas, CEO of the market research firm Marketplace Pulse.
In Search Of Search
Mozilla is running a test on 1% of its Firefox desktop browser population switching the default search engine from Google to Microsoft Bing, Ghacks reports. The experiment started in the first week of September and will run through January 2022. Firefox comes with a number of search engines preloaded so the user can toggle on or off, including Google, Bing, DuckDuckGo and regional companies like Yandex in Russia. But this test marks the first time in years that Firefox is even dipping a toe outside of Google, which has a deal with Mozilla to pay between $400 million to $450 million per year to remain as the default Firefox search engine, reportedly through 2023. Mozilla’s quiet Bing review comes as many search engine challengers and browser operators see an opportunity to do the impossible: peel market share away from Google. AdExchanger has more on that.
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By Rob Armstrong, SVP of Product at Eyeota
If you’re a publisher operating in today’s digital ecosystem, you’re probably pretty sick of hearing that you need to get better at capturing permission-based audience data. The future, everyone tells you, belongs to the publishers with the strongest first-party data strategies.
While that’s true, it’s not helpful in addressing the biggest roadblocks you’re actually facing – like how do you encourage your audiences to sign up, log in or subscribe with their valuable personal info?
Most publishers still wield opt-in prompts like blunt instruments, swinging at every potential lead with the same crude approach. That should, must and will change.
The tools needed to better optimize website prompts according to an individual’s receptiveness are already being refined to better equip publishers for the future. Let’s take a look at what the proper implementation of these solutions will look like and why it will change the game for publishers that lean into this approach.
The problem with today’s prompts
In their quest to gather first-party audience data, publishers have leaned heavily into sign-ups and login prompts. Some publishers simply require registration to view desired content, while others look to monetize their content directly through tiered subscriptions. While the models vary, there tends to be a blanket consistency within the site experience of any given publisher when it comes to when, how and to whom they deliver their prompts.
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Oracle launched a prospecting and lead-scoring product called Fusion Marketing on Monday, as the company tries to reframe the value of the CRM in a world gone crazy for the CDP.
Fusion is the first in a series of what Oracle is calling “Engineered Experiences,” its term for automating workflow processes across different business orgs (or Oracle cloud product suites), such as services, customer experience, human resources, commerce and advertising, said Holly Simmons, global VP of product management for Oracle Marketing, Commerce and Unity, its CDP tech.
Simmons’ own job title shows how Oracle is focused on integrating its various cloud services, often with the CDP product as connective tissue.
The Fusion product addresses a specific B2B marketing use case, since B2B companies must navigate a disconnect between the pace of marketing and sales campaigns, Simmons said.
Marketing campaigns take time to plan and collect data. They may be optimized mid-flight, but that would be shifting budgets toward the media that performs best. Audiences aren’t immediately filtered into the sales funnel, Simmons said.
Sales is a faster-paced campaign environment. People who recently read a certain white paper might test a subscription software product. Account managers direct potential targets to an upcoming event or webinar. In the world of B2B sales, target audiences either move down the sales funnel and convert within a relatively short window, or they fade off.
“You need a much more rapid cadence to do that outreach and keep the pipeline moving,” Simmons said.
Oracle Fusion addresses this issue by ingesting advertising audiences and the client’s first-party data across its cloud products to create live lead-scoring filters that identify potential sales targets based on the data and place those individuals in the sales funnel.
Not all Oracle customers use the Unity CDP, Simmons said. But the Fusion product relies on the CDP to make scoring judgments.
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"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media. Today’s column is written by Oz Etzioni, CEO at Clinch.
2021 is shaping up to be a breakthrough year for advertising technology. After several fallow years for ad tech companies and a necessary period of reinvention because of both changing marketing conditions and the pandemic, ad tech has evolved products, capabilities and privacy practices, which has reignited M&A interest.
Just look at recent deals. Many once-independent players have been purchased by larger tech platforms: Integral Ad Science acquired Publica and Publicis Groupe acquired CitrusAd (to name but two). There is also an increase in the number of once-independent players seeking financing through the equity markets and a wave of SPAC mergers with companies like Captify, Innovid and AdTheorent recently announcing massive deals.
That’s unquestionably good for the founders and VC’s that backed these companies, kept them running through turbulent times and helped them become worthwhile acquisition targets. And that’s how the news covers them: Ad tech is back, baby!
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You know you’ve won the lottery as a brand when you go viral on TikTok (for a good reason).
Last year, it was Ocean Spray, and this year it’s Gap, whose vintage logo sweatshirts – the brown one, in particular – made a comeback on TikTok as an unexpected fashion trend of 2021.
Gap capitalized on the organic buzz with a campaign on TikTok over the summer to crowdsource the color for its next hoodie using a customized voting tool. (The winning color was neon pink.)
“This turned into an acquisition opportunity to reach teens, which is a new segment for us,” said Mary Alderete, Gap brand’s CMO. Gap launched its teen line in May 2020.
“It’s not just about disseminating the assets that we’ve created, but also co-creating and engaging with the customer on these platforms,” Alderete said. “It’s all about balancing and finding the initiatives that help you grow the brand.”
AdExchanger caught up with Alderete.
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"On TV & Video" is a column exploring opportunities and challenges in advanced TV and video.
Today's column is by Jo Kinsella, President, TVSquared.
Since the dawn of TV, Nielsen ratings have been the gold standard for marketers. They measured the percentage of a group (e.g., women aged 18-49) or households in a particular designated market area (DMA) that tuned in to a program. If you wanted to reach a specific cohort, you asked Nielsen which show offered the highest-rating ad breaks, and that’s where you placed your TV budget.
It was a simpler time. For years, families gathered at a set time and place to watch TV. Our lives revolved around appointment TV, and if you weren’t home when the show aired, you missed it.
Fast-forward to today, and “watching TV” is a totally different beast – one where Nielsen and its ratings simply can’t keep up.
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