With Covid accelerating digital adoption by an average of seven years, ecommerce businesses have taken advantage of programmatic and technology platforms to enable their growth. But spiralling costs, platform changes and privacy regulations are stifling these growth drivers, forcing Direct to Consumer (DTC) companies to rethink their approach. And as they do so, partnerships are emerging as a notably viable alternative. So what’s driving this readjustment, and why should uninitiated ecommerce businesses be reappraising the partnership approach?
Acquisition costs are out of control
Firstly, user acquisition costs are becoming untenable for retailers relying on the platform giants to power their customer acquisition strategy.
Google and Facebook share close to 80% of the UK digital advertising market and we’re seeing this dominance feed into higher prices. These have soared on average by 45% across the duopoly in the last two years, with some verticals seeing triple-digit rises.
As new businesses enter the ad market and ecommerce companies shift more budget into digital, greater competition is driving prices up and pricing many online businesses out.
And just as these demand-side pressures are making their impact, tightening data protection regulations and platform changes – especially Apple’s iOS privacy updates – are affecting the supply side.
Removing the building blocks of programmatic in turn impacts the audiences platforms can deliver. A lack of behavioural targeting and retargeting data means platforms are less efficient at tracking consumers, reducing their effectiveness as growth channels.
And, as discussed, when users opt out of tracking and audience pools decline, it costs more to reach them through platforms – and the price hikes can be staggering. Loose-leaf tea-seller Plum Deluxe has seen its average customer acquisition cost on Facebook and Instagram rocket from $27 to $270, forcing the DTC business to cut spend in these channels.
Privacy changes are severely impacting the ad revenues of the big tech platforms, costing Snapchat, Facebook, Twitter and YouTube nearly $10 billion in just six months. To compensate for this lost revenue, inventory prices have risen, heaping further pricing pressures on ecommerce companies.
Rethinking the value of partnerships
Today, many ecommerce businesses struggle to buy effective ROI-positive media. Facing skyrocketing prices, declining acquisition pipelines and less effective campaign targeting, optimisation, and measurement, they’re pulling budgets from their traditional channels and looking to diversify their spend. And one critical area is publisher partnerships.
Ease of doing business has always been a key factor in adopting new technologies and approaches. It’s why programmatic is so successful. Despite growing distrust of its increasing ineffectiveness, it’s easy to implement and make money from. In contrast, building ecommerce partnerships have traditionally been laborious, manual, complex, difficult to manage and measure and impossible to scale. But this is changing.
With their ability to develop informative, consumer-focused ecommerce content directly linked to retailer websites, publishers are emerging as a vital channel to fuel ecommerce growth and a viable alternative to programmatic. And new partnership supply-side platforms now allow publishers to automate their approaches, consolidate and aggregate data from multiple platforms and networks, report across them in real time and track the performance of articles, links and traffic sources.
In saving time and money, publishers can focus on value-generating activities, such as creating great ecommerce content that they can make money from.
Now technology means that ecommerce partnership strategies are as easy to set up and scale as programmatic. But there is a significant difference – and it comes down to ROI. As ROI continues to decline in programmatic, partnership marketing delivers an average ROI of 16x, making it a channel that can’t be ignored.
Those retailers who plan on being successful going forward must seriously consider publisher partnerships, which demonstrably have numerous advantages over other contenders. Retail media is touted as a means for ecommerce businesses to open new revenue streams, for example, but Boston Consulting Group expects only a few players will become dominant here, with the majority shut out. It’s partnerships that offer the real future opportunities – and for so many more companies.
While ecommerce companies have seen an erosion in programmatic advertising’s ability to deliver growth, publisher partnerships can be the saviour. Today’s one-stop-shop platforms are more than proving their value, and retailers must invest in them – even, arguably, focusing the majority of their online spend in this channel – to secure future growth.
Hanan Maayan, CEO and co-founder, Trackonomics