The Booming Business of E-Commerce Site Monetization - Lift361

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The Booming Business of E-Commerce Site Monetization

By Ed Higdon. Posted in Action | Insight

August 16, 2018

It’s no secret that brands and retailers are always looking for new ways to reach customers, grow their business and get a bigger piece of the pie. But in the crowded online retail space, gaining an edge isn’t as easy as it used to be. However, there is a new trend emerging that is mutually beneficial to product manufacturers and the retail outlets that sell them: e-commerce site monetization.

How Site Monetization Works

Brands and retailers are finding great success coming together on e-commerce websites. Every site has its own advertising policies and procedures, but typically the arrangement is simple: Brands that sell their items through a retailer’s website can earn prime space at the top of search results and category pages by paying for sponsored space.

The Benefits to Brands And Manufacturers

Brands like this type of ad platform because it allows for hyper-targeting of specific customers. Typically, the retailer’s platform will match products with the most relevant audience based on first-party data. This ensures that visitors are only seeing ads and products that align with their needs – they won’t, for example, go searching for men’s sweaters and see women’s bathing suits at the top of their search results. It also allows the brand and the retailer to determine what influences customers to act on a sponsored product listing.

The Benefits to E-Commerce Retailers

These arrangements are a win-win for the brand and for the retailer. The brand is guaranteed to get its products in front of shoppers and the retailer earns revenue that is almost 100% profit. In an industry like retail where margins mean everything, ad space has been an ideal way to augment profits and offset skyrocketing costs like those associated with free shipping and increasing credit card processing fees. E-commerce margins have been estimated to be as low as 3% when it comes to selling products. But ad margins can be as high as 70%, making the option something of a no-brainer.

Amazon is the most recognizable e-commerce site that leverages product ads. Amazon sellers can boost their positioning in search results by purchasing promoted space, or they can purchase space on the bottom of pages in a designated “promoted products” section. Mega-retailers like Walmart and Target have developed their own private ad exchanges, and Best Buy has also launched its own in-house media group to manage onsite advertising.

The Key To Site Monetization Success

The secret to making site monetization work is to ensure that the products being presented to customers are relevant and worthwhile, and that the ads are clearly marked as promotional listings. If ads are not relevant to the people searching for products, they won’t click on those ads and they certainly won’t buy the item. By law, ads and sponsored content must be clearly labeled as such, so keeping those ads clearly marked is first and foremost a compliance issue, but it is also about trust. People are willing to click on sponsored and promoted products if they are relevant and meet their needs. But if they feel they’ve been duped into clicking an ad, it will fracture their relationship with the brand and the retailer.

There is expected to be double-digit growth in the retail e-commerce ad space over the next several years, and data is the factor that is driving that growth. Retailers are able to provide data that other media simply cannot deliver. Through site ads, brands and product producers can gain insight into the path to purchase and determine accurate ROI on every ad they place with a retailer. Rather than being concerned about impressions or trying to infer an ad’s impact on the bottom line, brands are provided hard data that accurately measures success and e-commerce retailers have a new line of revenue to boost profits and lift sales.