Marketplaces are increasingly recognizing the potential of Retail Media revenues to support profitability, but the most successful programs focus on seller growth to create a virtuous circle of benefits.
3 min read
Marketplaces are embracing the idea that high-margin Retail Media revenues can help support profitability. This is especially true as a worsening global financial climate is squeezing margins ever tighter.
But the marketplaces with the highest performing Retail Media programs look beyond the revenue to a virtuous circle of benefits that high-intention ads like Sponsored Products can bring. Key amongst them is accelerating growth for marketplace sellers. Focusing on seller growth makes for happy sellers with a knock-on effect that improves the customer experience and drives higher growth in GMV and retail media revenue.
Sellers in the driving seat
According to Internet Retailing, by 2027, 50% of all online sales will go through marketplaces. To support this growth, the number of new marketplaces is accelerating. That’s great news for consumers and marketplace vendors, as it means greater choice.
Meanwhile, vendors are typically present on upwards of four marketplaces at the same time. And they are constantly assessing where they should put the most effort based on the ROI they see.
Retail Media, a game changer
Marketplace vendors naturally value sales above all else. In order to sell, a vendor’s product needs to be visible to the customer. This is where sponsored product ads can make the difference. A sponsored product ad, delivered at the right place and at the right time, can help smaller vendors compete with the larger brands and help push sales for the vendor.
Marketplaces deploying sponsored product ads will see an initial surge of interest, but if the ads don’t bring in revenue quickly, vendors will shift their budgets to a platform that delivers results.
Here are the three things that marketplaces need to get right to make sponsored product ads a success.
1. Make sponsored product ads child’s play
Retail Media technologies are evolving fast, and vendors face different advertising platform interfaces, features, and business models on each marketplace they sell. If your vendors can get up to speed and see results easier and quicker than on a competing site, you’re more likely to keep them engaged for longer.
Make sure the process of getting started with your retail media offering is easy, efficient, and fast. Providing training materials and a user-friendly interface will help sellers acclimate and quickly understand how to create a campaign.
Building a high-performing sponsored product ad campaign has historically required a deep understanding of how to balance variables such as minimum bid price, product selection, and keyword choice. Now though, closed-loop reporting data, available in the walled garden of a marketplace, allows for the creation and training of AI algorithms to take the guesswork out of campaign creation. Marketplace sellers can then maximize their return on ad spend (ROAS) by using AI-guided tools to automate the creation of campaigns.
Adoption of AI-automated campaigns requires that the seller's trust is established. Building trust is possible by giving the seller control. Offer varying degrees of automation, ranging from one-click options to full manual control, with real-time recommendations at each step. And most importantly, demonstrate the performance of each campaign through live reporting, so the seller can track their spend and see the results
2. Keep it relevant
It might seem unlikely, but marketplaces frequently display irrelevant ads to their customers. Poor ad relevance results in a low click-through and conversion rate, reducing both organic and CPC revenue and lowering the value of digital assets. The goal of a sponsored product ad is to drive conversions for sellers and increase profit for the marketplace.
Ensure that the most relevant ads are taking the top positions by using the relevancy rating of an ad as a starting point rather than the number of display positions available. Less relevant ads can then be displayed in a lower position to keep the fill rate high. At a minimum, the sponsored product ad must be as effective as the organic result it replaces.
Continuously monitor ad relevance, considering the performance of both served ads and real-time calculations of click and purchase probability. Ensure your retail media platform can compute these probabilities instantly for a seamless shopping experience.
3. Promote fair competition
Search algorithms prioritize products bought and reviewed by existing customers and sellers with a positive transactional history. So as a marketplace grows, newly signed-up unknown sellers struggle to get a foothold. This disadvantages the consumer because they are presented with a narrow selection of products. And ultimately, the lack of choice for the consumer stymies growth in the marketplace.
Promoting fair competition among vendors for ad spots creates a virtuous cycle for the marketplace. It’s a way of supporting smaller sellers that widens shopper options, increasing customer loyalty, and GMV, resulting in a higher potential for ad relevance, better fill rates, and higher advertising revenue.Fair competition presents technical challenges, such as:
- Differentiating between product and offer to determine the winner of the buy box.
- Incorporating product similarity in relevancy criteria for displayed items.
- Providing sellers support to maintain relevant and comprehensive product descriptions and media.
Retail media is essential for marketplaces not only as a way to monetize digital inventory but to drive a high-growth seller community. By prioritizing your sellers, you create the foundation for a successful marketplace, as they are able to focus on what they do best – sell. Investing in tools to help sellers scale quickly will ultimately lead to higher GMV and advertising revenue.
relevanC offers a turnkey sponsored product solution built from the ground up for marketplaces. Our technology powers the Retail Media operations of retailers and marketplaces worldwide. Founded in 2017, relevanC has offices in France, Brazil, and Colombia and operates globally.