Online Marketplaces: The Brightest Stars in the e-Commerce Galaxy?

online commerceGiven a choice between buying a branded product from Amazon and a similarly priced one from an e-commerce store on the brand’s own website, which purchase option do most people choose?

In most cases, people opt for Amazon.

And why wouldn’t they? Online marketplaces like Amazon devote the vast bulk of their energies to removing the obstacles to purchasing products and improving the overall buyer experience.

The e-commerce stores on most company or brand websites don’t get nearly the same degree of laser-focused attention.

So it comes as little surprise that as online e-commerce continues to evolve, marketplaces like Amazon, eBay and Grainger are outpacing general e-commerce websites in terms of their growth and popularity.

Let’s face it, compared to most standard e-commerce sites, e-marketplace sites do a superior job dealing with the four major customer drivers:  selection, value, convenience and user confidence.

It shows in the growth statistics. Looking back over the past decade, Amazon’s yearly growth has averaged around 32%.  Compare those stats to standard sites … and there isn’t much of a comparison.

If anything, the future looks even brighter for marketplaces. With the increased adoption of mobile devices for online shopping, dedicated mobile apps from marketplaces like eBay and Amazon are making buying by phone easier and more convenient than ever.

Their mobile apps iron out the “payment kinks and concerns” that have bothered some mobile purchasers. These apps solve the potential security problem of having to input payment or address/shipping information into the phone when the purchase is made.

The rise of online marketplaces isn’t limited to just Amazon and eBay, either. Numerous other robust e-commerce marketplaces in both the B-to-C and B-to-B realm are thriving, too – not just in the United States but in the developing world also.

The global aspect is quite important, actually. Marketplace e-commerce may represent only about one-third of total online sales in the U.S. … but in China, such marketplaces are capturing closer to 80% of the online business.

It helps that these marketplaces offer many PayPal-like payment options. This solves the problems of payment when fewer people overseas use credit cards for purchases. (In China, less than 5% of online customers pay via credit card.)

These developments don’t presage the end of “conventional” e-commerce sites, of course. But they do suggest that companies should seriously consider online marketplaces as a prime channel for getting their products into the hands of end-users.

After all, it’s only natural that customers are going to take the “path of least resistance” – making the buying process as effortless as possible.

Online marketplaces have that game down to a science. No one does it better.

Fast Fade: Unpaid brand posts on Facebook are getting rarer by the day.

Lower ReachIt was just a matter of time.

Once Facebook ramped up its advertising program in order to monetize its platform and mollify its investors, unpaid posts by companies and brands were sure to be the collateral damage.

Sure enough, the recent monthly stats show that the “organic reach” of unpaid content published on company and brand pages on Facebook has been cut in half from where it was just a short time ago.

To illustrate, look at these stark figures gathered in an analysis by Ogilvy of 100+ country-level brand pages measuring the average reach of unpaid posts:

  • October 2013: 12.2%
  • November 2013: 11.6%
  • December 2013: 8.8%
  • January 2014: 7.7%
  • February 2014: 6.2%

What these stats show is that within the span of less than six months, the average reach of unpaid brand posts dropped by nearly 50%

To go even further, an anonymous source familiar with Facebook’s long-term strategy is claiming that its new algorithm could ultimately reduce the reach of organic posts to 2% or less.

Actually, the reason for the squeeze is more than just Facebook’s desire to increase advertising revenue.

Here’s a dynamic that’s also significant:  A Pew Research study conducted in mid-2013 found that the typical adult American Facebook user has around 340 friends.

That average is up nearly 50% from approximately 230 friends in 2010.

Of course, more friends mean more status updates eligible for feeds … and Facebook’s not going to display them all to everyone — even if it wanted to.

Also, Facebook users “like” an average of 40 company, brand, group or celebrity pages each, according to a 2013 analysis done by Socialbakers, a social media analytics firm.  That translates into an average of ~1,440 updates every month.

Compare those figures to five years ago, when the average number of page “likes” was fewer than five … yielding fewer than 25 monthly updates on average.

Clearly, there’s no way Facebook is going to to be able to display all of these updates to followers.  So … the content is squeezed some more.

The final nail in the coffin is the rise in “promoted” posts – the ones that brands pay dollars to promote. It’s only natural that Facebook is going to give those posts priority treatment.

Thus, the hat-trick combination of more friends, more likes and more promoted posts is what’s causing “organic” brand posts to go the way of the dodo bird.

In retrospect, it was only a matter of time before a major social platform like Facebook would seek to monetize its program in a big way.

In some respects, it’s amazing that the free ride lasted as long as it actually did …

The [dis]connect between content “quality” and online advertising.

Jack Marshall

Digiday’s Jack Marshall

I really appreciate the work of Jack Marshall, a reporter at marketing e-zine Digiday, who is helping to expose and explain the “brave new world” of online display advertising and how it has evolved into something that’s rife with problems.

ad exchangesConsider a recent column of Marshall’s titled “Is this the worst site on the Internet?”

In it, he notes that for “legitimate” online publishers that rely on advertising as their revenue model, that model is becoming a more daunting proposition with each passing day.

And a big reason is the emergence of other websites that are “gaming” the online system – not to mention the ad tech middlemen that are their willing accomplices.

Essentially, what’s happening is that ad dollars are being siphoned away from websites that provide professionally produced content and are going to sites that are explicitly constructed to serve up as many ad impressions as possible.

These sites contain little or no original content.

Marshall’s “Exhibit A” is Georgia Daily News, a website which purports to cover “news, traffic, sports, politics, entertainment, gossip and local events in Atlanta.”

As Marshall contends, “What it actually features is content ‘curated’ from elsewhere on the web, and some it has simply stolen from other major news sites” such as the Daily Mail.

Sizable chunks of the website’s content have nothing to do with Atlanta.

GADailyNews home pageConsidering the type of general news site it purports to be, GADailyNews.com doesn’t attract very much traffic at all.  And why would it? — since it contains precious little information of value or interest to anyone who is actually “seeking news about Atlanta.”

But it sure does generate a lot of ad impressions.  According to Marshall, each article page on the site features seven display ad units – all of which refresh every 20 seconds or so.

In the two-minute span of time it took him to read an article about Katy Perry and John Mayer (content copied from an Australian news site), Marshall was served more than 40 ad impressions.

Marshall continues:

“One page has served me nearly 500 ads in just 20 minutes – and I couldn’t stop refreshing them even if I wanted to.”

[And these ads aren’t for B-list advertisers, either.  They’re for brands like American Airlines, Hilton Hotels, Charles Schwaab and others.]

What’s happening here, of course, is that websites and ad tech middlemen have figured out that the algorithms of even the “quality” ad vendors like Google, AdRoll, and Bizo can be gamed pretty easily to serve ads on a low-quality site like Georgia Daily News, which is owned by a single-person entity called Integrated News Media Corporation.

It’s hardly the type of media vehicle that big-brand advertisers would normally wish to use for advertising.  But thanks to the vagaries and complexity of the ad exchange landscape, they are.

For every Georgia Daily News site, there are hundreds of others like it that cobble together seemingly valuable content with a passably convincing set of audience characteristics.

Put it together, and it adds up to problems on two levels.

First, advertisers are paying for impressions that are near-worthless.

Second, since there are finite ad dollars available, legitimate online publishers are losing out on those funds, which are far more important to their well-being than they are for sites that don’t engage in any true journalism at all.

As Jack Marshall concludes:

“Thanks to fraudulent traffic, dubious sites and middlemen with low quality standards, life is only getting harder for those publishers with expensive content teams to support.”

Take Your Pick: One Super Bowl Ad Spot … or 14 Billion Facebook Ad Impressions

Super Bowl Ad Cost

 

This year a single 30-second ad spot during the Super Bowl TV broadcast will cost a cool $4 million.

And that’s just for the placement alone — not the dollars that go into producing the ad.

The high cost of advertising is directly related to Super Bowl viewership, of course, which is predicted to be north of 100 million people this year.

Still, $4 million is a really hefty sum, even for major brand advertisers.  Just how big is underscored in some comparative figures put together by Jack Marshall, a reporter at marketing e-zine Digiday.

Jack Marshall

Digiday’s Jack Marshall

In lieu of spending $4 million on a single ad spot, here’s how Marshall reported that the promotional money could be spent in alternative ways:

  • 14 billion Facebook Ad Impressions – According to digital marketing software firm Kenshoo, right-hand column “marketplace” ads on Facebook averaged 27 cents per thousand impressions during 2013.  This means that for $4 million, an advertiser could run a Facebook marketplace ad every second of every day for the next 469 years.
  • 3 billion Banner Ad Impressions – In 2013, average online display ad CPMs were running just shy of $1.30, looking globally.  Applying that figure to the U.S. market translates into 3 billion display ad impressions for your $4 million spend.
  • 160 million Sponsored Content Views – The typical charge is ~$25 to distribute sponsored content to 1,000 readers.  At that rate, $4 million would give you 160 million impressions (provided a publisher could actually deliver that many!).
  • 10.8 million Paid Search Clicks – With an overall average cost-per-click of 37 cents in 2013, $4 million would cover just shy of 11 million clicks.  That may be one-tenth the size of the Super Bowl viewing audience … but at least your audience would be actually searching for your product or service instead of heading to the kitchen for more corn chips and queso dip.

These are just some of the comparative figures outlined by Jack Marshall in his article.  You can read the others here.

Is AdTrap the answer to our prayers when it comes to blocking online advertising?

ad blocking deviceYou may have heard of AdTrap … or maybe you haven’t.

AdTrap is a newly developed device that intercepts online ads before they reach any devices that access a person’s Internet connection.

That basic action means that people are able to surf the web – including viewing videos – without the onslaught of online advertisements that seem to become more and more pervasive with every passing month.

The fundamental promise that the developers of AdTrap are making is a return to the “good ol’ days” of web surfing.

You know, back when most web pages you downloaded contained text and pictures – and virtually no advertising.

AdTrap’s motto is a simple and powerful one:  The Internet is yours again.”

Not surprisingly, there’s a good deal of excitement surrounding this new product.  In fact, interest has been so great that the invention attracted more than $200,000 in funding — raised in a 30-day Kickstarter campaign in early 2013.

Those funds are now being used to manufacture the first AdTrap units for shipment to “early adopter” consumers across the country.

How New an Idea Is This?

advertisingIn actuality, there have been a plethora of (often-free) software and browser plug-ins offered to consumers that can block online advertisements. 

But most of them have significant limitations because they’ve been designed to work only with specific browsers or on specific devices.

Free is good, of course.  But the developers of AdTrap are banking on the willingness of consumers to shell out $139 for their product – a rectangular box that looks a lot like a wireless router and that intercepts advertisements before they reach a laptop, tablet or mobile device.

The beauty of AdTrap is that it will work on every device connected to a person’s network.  Situated between the modem and router, it takes just a few minutes to set up.  

CNN technology correspondent Dan Simon reports that AdTrap does an effective job blocking advertising content.  But not perfectly; ads still appear on Hulu content, for example. 

But the developers of AdTrap report that they’re working on ways to block even more content going forward, including ads on Hulu.

Is this Bigger than Merely Blocking Ads?

Beyond the collective sigh of relief you’re likely hearing from those reading this blog post … what are the larger implications if AdTrap and similar devices are adopted by consumers on a large scale?

One not-so-positive implication may be that websites will no longer offer be able to offer content without charge, since so many publishers’ business models rely on advertising content to help pay most of the bills.

If advertising isn’t appearing thanks to AdTrap, people aren’t getting paid.

So let’s think about this for a minute:  It’s true that the Internet was blissfully free of wall-to-wall advertising 15 years ago compared to today. 

But cyberspace was also far less robust in terms of the quantity and quality of the informational and entertainment content available to us.

So yes … having a device to block 80% or more of the ads served to us is a very attractive proposition.  But if it means that some of our favorite sites move to pay-walls as a result, it might be that making a $139 investment in an AdTrap device isn’t such a “no-brainer” choice in the final analysis.

What do you think of this development — pro or con?  Please share your thoughts with other readers here.

Optify takes the pulse of B-to-B paid search programs.

Optify logoI’ve been highlighting the key findings of Optify’s annual benchmark report charting the state of B-to-B online marketing. You can read my earlier posts on major findings from Optify’s most recent benchmarking here and here.

In this post, I focus on the paid search activities of business-to-business firms.

Interestingly, Optify finds that pay-per-click programs have been undertaken by fewer firms in 2012 compared to the previous year.

And the decline isn’t tiny, either:  Some 13% fewer companies ran paid search programs in 2012 compared to 2011, based on the aggregate data Optify studied from 600+ small and medium-sized B-to-B websites.

However, those companies who did elect to run pay-per-click advertising programs in 2012 achieved decent results for their efforts.

The median company included in the Optify evaluation attracted nearly 550 visits per month via paid search, with a conversion rate just shy of 2%, or ~45 leads per month.

[For purposes of the Optify analysis, a lead is defined as the visitor taking an action such as filling out a query form.]

Leads from paid search programs represented an important segment of all leads, too – between 10% and 15% each month.

The above figures represent the median statistics compiled by Optify. It also published results for the lower 25th percentile of B-to-B firms in its study. Among these, the results aren’t nearly so robust: only around ~60 visits per month from paid search that translated into 6 leads.

Since the Optify report covers only statistics generated from visitor and lead tracking activity, it doesn’t attempt to explain the reasons behind the decrease in the proportion of B-to-B firms that are engaged in paid search programs.

But I think one plausible explanation is the steadily rising cost of clicks. They broke the $2 barrier a long time ago and see no signs of letting up. For some companies, those kinds of costs are a bridge too far.

I’ll address one final topic from the Optify report in a subsequent blog post: B-to-B social media activities. Stay tuned to see if your preconceptions about engagement levels with social media are confirmed – or not!

Move Over, Howard Stern: Now Google’s the “King of All Media”

Google and Print Advertising Revenue Trends, 2004-2012It’s official. With nearly $21 billion in ad revenue generated during the first half of 2012, Google now attracts more advertising business than all U.S. print media combined.

That is correct:  German-based statistics portal Statista reports that Google garnered ~$20.8 billion in total ad revenues over the period, while all U.S. newspapers and magazines took in only about $19.2 billion.

Never mind that the comparison isn’t completely apples-to-apples … in that print revenues are for the United States only, while Google generates ad revenues worldwide. Still, it’s a dramatic milestone, and it says a lot about the fortunes (and future) of print versus online advertising.

Statista has helpfully published trend charts that show how quickly the ad picture has changed (see above). Only a few years ago, print advertising dominated the scene, but the trajectories of it and Google have been on opposite paths ever since.

It was inevitable that the lines would eventually cross, but how many could have foreseen it happening as early as 2012?

As if on cue, Advance Publications, a company that owns a number of venerable newspapers in New Orleans, Cleveland and elsewhere, has just announced that it is likely to cut the publication frequency of the Plain Dealer newspaper from its current seven days a week.

If Advance follows through on its intentions, it will join the New Orleans Times Picayune as a daily newspaper that’s no longer a daily.

The publisher’s letter to Plain Dealer readers described the newspaper’s future in lofty terms, noting that changes were coming as the paper seeks to “embrace dynamic shifts in the way information is consumed.”  And other such language.

It also noted that the pending changes are “not about cost-cutting.” But who believes that?

And in fact, the publisher’s letter states also that “if we maintain the status quo, we risk doing what everyone – our employees, advertisers and the community – wants to avoid: disappearing.”

If people don’t see a correlation between the Statista data and what the Plain Dealer has in store for its readers … they’re living on another planet. 

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