What You Need to Know About Facebook’s New E-Commerce Platform, ‘Shops’

This month, I want to take a look at the Facebook rollout of ‘Shops’, Facebook’s official play at becoming the dominant force in social commerce and the overarching benefits I believe this new feature will have for Facebook & our ability to help benefit local & small businesses. First off, some background. Shops is a seamless integration of a Shopify store into a business’ facebook page that allows customers who are browsing the business page (and/or see promoted products that they like) to easily purchase the products directly from Facebook’s product suite (see below screenshot on the Shops user experience flow on Facebook & Insta). You might see the below and say ‘Tyler, I have seen these features before on instagram’, in which you would be correct! Facebook has been dabbling and testing ecommerce features for the last 5 years from the Facebook ‘Marketplace’ and the Instagram shoppable ads which took a very similar approach to ‘Shops’ with ‘collections’ and a seamless and near identical checkout process. Instagram is also getting a facelift with the new Shops feature with the addition of a new ‘shopping tab’ coming this summer. Ultimately, for the past 5 years Facebook has been effectively beta testing ways in which to successfully integrate  ad supported commerce into their social platforms and I believe ‘Shops’ is what will bridge that gap and make Facebook a trillion dollar company while helping local business get online…here is why:

   

Ease of Use and Adoption

  • For any product to become a success the most important variable is undoubtedly, adoption rate. Luckily, for Facebook & small businesses alike, the Shops rollout makes integrating small business’’ existing eCommerce catalogs or creating a new catalog super easy and almost every business can create one with little extra effort. 
    • For clients with existing Shopify stores, shopify has worked closely with facebook to create an ‘import’ feature of sorts where clients can seamlessly import their shopify catalogs with a few clicks of a button. 
    • For clients with existing eCommerce catalogs, they can upload a csv/xlm file with all their available products directly to the Shops UI. 
    • For clients with no online store presence, they can easily create products within the Shops UI and have a store up and running in minutes – see video in the aforementioned link. 
  • Ultimately, Shops is a simple & fast way for small retail businesses to get online and immediately begin generating revenue centered around their social tactics across Facebook, Instagram, messenger & whatsapp. AND the best part, it is FREE (kind of – the seller pays a transaction fee per product sold). 
  • From a numbers perspective, Facebook already has nearly 1M shops ready to roll out (from previous versions of their shops tab on the biz page) and with the seamless integration of Shopify, I don’t see why almost all 500k shopify stores won’t soon have Facebook social stores. 

Ad Supported 

  • In Q1’20, Facebook made nearly 17B in ad supported revenue from businesses, agencies, & publishers who were heavily advertising to promote their brands, so it is no surprise to see that Shops and Shops’ collections will be ad supported so that businesses can further reach potential customers and get them to convert.
  • The conversion aspect of Shops + Ads is what really intrigues me…in theory, retail or eCommerce businesses who already run targeted social ads should see an increase in total conversions and conversion rate if they adopt the Shops feature and get their products on Facebook. The reason being, the path of least resistance. In traditional ads promoting a collection, a users clicks 4-5 times on average to get to the check out page (clicks the ad, click the product, click add to cart, click checkout) whereas the Shops ads will get users in front of the checkout page in less than 3 clicks. As we’ve found with most of our clients, the more steps to purchase, the larger the probability of an abandoned lead or conversion. Additionally, the ads will act like they always have in which users can easily share products they see with their friends and family through Facebook’s integrated messaging apps (WhatsApp & Messenger) – see below. 

 

As you can see, Shops is bringing about a new way to look at social commerce within the Facebook ecosystem and one that if they can overcome adoption hurdles, should blossom into a powerhouse with massive growth & revenue potential (if Pinterest revenue growth is any indication & not to mention all the transaction fees FB is about to collect). Ultimately, time will tell and I will keep you updated as we follow and garner more info from Facebook.

Google Insights – Responsive Search Ads

Google Ads is the most widely recognized platform used for SEM marketing. The innovation and flexibility of the platform are two of the many features that draw people to utilize it. Google prides itself on always creating new ways for advertisers to position their content to their target audience at the right moment.  At the end of 2018, Google released the newest ad format in Responsive Search Ads (RSA). These new ads have begun to revolutionize the structure and capabilities an advertiser has. 

For many years, the main ad format used for Google search campaigns was the expanded text ad format. Expanded text ads, or ETA’s for short, consist of three headlines and two descriptions. The biggest advantage responsive ads have to offer, is the ability to test up to 15 different headlines and 4 descriptions. Beyond this, Google will deliver ads with the most relevant material that will make a user engage based on their algorithms, the users keyword history, device, and online behaviors. For example, someone who is searching for apartments that allow pets will be more likely to click on an ad that has “Pet-Friendly Apartments” in their headline compared to an ad that does not. The algorithm is capable of recognizing the user’s needs and thus can dynamically create the necessary message that will engage the user. Google has reported seeing responsive ads having engagement levels 5-15% higher than that of a normal ETA. 

With 43,680 different combinations of ad copy, there are countless possibilities of different ad messages to deliver on. Advertisers can view each variation of headlines and descriptions under the “view assets details” option in the Google Ads platform. Here, advertisers can see the impressions share each combination garnished. These insights should not only be used for ideas on refreshing ad copy, but also in testing the strength of keywords associated with the campaign. The extra real estate provides a great opportunity to see how each keyword performs when being served. When creating RSA’s, use as many keywords as available since responsive ads with multiple unique headlines and descriptions tend to be higher engaging. If there is a main headline or message that the ad is trying to convey, the advertiser also has the choice to pin headlines. This will ensure that the headline pinned will always be present whenever an ad delivers an impression. Just remember the third headline and second description might not always show depending on the user’s device type. Google also provides a quality score to each responsive ad that is created. It includes tips and recommendations on ways to construct and improve the effectiveness of your responsive ads. 

Keep in mind, a responsive search ads purpose is not to replace all other ad formats but to compliment them. Best practices promote that advertisers have one responsive search ad per ad group. Since Google is already testing alternative ad creatives, there is no need to have more than one per ad group. If fact, more than one can actually hurt your ads performance by preventing proper optimizations from taking place. Hindering the amount of ad formats dedicated to your campaign will also limit your level of competitiveness when bidding in auctions. 

Responsive search ads are just another example of Google’s continuation in moving towards a more automated approach when it comes to advertising. These ads showcase us what the future of advertising could look like. The automatic optimization and removal of manual A/B split testing are indications of how advertising is moving towards a more “machine learning” AI strategy. Responsive search ads reflect this belief while still providing advertisers a level of control and flexibility. It becomes a nice blend of the creativity of the message the advertiser provides with the most up to date, industry leading, smart learning technology. Together, they give advertisers the necessary tools to reach engaging users at the right place, at the right time.

During Hardship, Those Who Find Opportunity Are Poised to Reap the Benefits

What a way to start 2020, right? The new decade started on a high note, the stock markets were at all-time highs, we were making significant strides in growing our digital revenue and account volume, team morale and participation was the highest I had seen since starting, and our teams were firing on all fronts from an execution standpoint. Then, it happened, the unforeseen COVID-19 virus rippled through the world, wreaking havoc on all fronts and not only crippling companies, but entire countries. Since then, COVID-19 has effectively controlled 99% of all thought and communication channels over the past two months in which I have noticed an undertow of fear across most these conversations…’the market is crashing, all my advertisers are cancelling, how are we going to get any new business, I am going to get laid-off, etc’. Naturally, all these fear undertones stem from the unknown consequences the virus will have two months from now and five years from now. I don’t want to completely dismiss the virus as it is very scary and in the short term (6m-2 years) we are most likely going to see even more stress, anxiety, and economic distress before it gets better. Most banks have already declared a global recession is imminent/already started, supply & demand imbalances within the ad market will likely drive ad revenue growth negative and unemployment will unfortunately continue (currently ~5%). These are consequences we can foresee during any market disruption/correction. Perhaps the more important question is, “how long will it last?” Unfortunately, nobody knows and anyone who tells you otherwise is lying or delusional. Ultimately, we must be cognitive of these outcomes but not dwell on things we can’t control. Furthermore, during this time of uncertainty and fear, I would like to pose an optimistic outlook… One that places COVID-19 at the epicenter, acting as a catalyst to changing audience behavior and opening the gate for advertisers and publishers alike to capitalize on the trends created during this down trend. 

With that preface, I want to frame the opportunities present by dissecting the detailed analysis and insights our friends at Magna Global shared in their March report, BEYOND THE OUTBREAK: HOW COVID-19 WILL AFFECT THE GLOBAL ADVERTISING MARKET. To provide ethos on Magna, they are a highly respected investment subsidiary of IPG Global in which their main goal is to leverage the asset scale under IPG to provide data driven market insights and ultimately make smarter, more effective media investments for agencies and their clients alike. 

Historical Ad Revenue 

In the report, you will see an analysis of global Ad revenue as it is correlated to global GDP and as you can see in the below screenshot with slowing or negative GDP growth within the economy, Ad revenue always sees outsized declines. This is intuitive in my opinion and what Magna describes as the ‘amplification factor’, as business’s growth contracts so does their desire to spend on marketing efforts causing ad revenue growth declines that vastly out paces the declines in economic growth. On the contrary, and why I present this data, whenever we hit the bottom of the COVID-19 recession we can suspect the same phenomenon to take effect in which ad revenue growth can 2-3x the economic growth in a matter of a year once brands feel/see the economic sentiment turn positive. Look at the trends after the 2008 recession and the 9/11 attacks…massive ad revenue contractions and then massive ad revenue expansion swings in a matter of years. Given the unprecedented nature of COVID and it’s correlation on the market I think the numbers and projected % of decline are merely that, projection, and instead we should take note and focus on the historical trends presented. And ultimately, I provide this context to give hope that ad revenue growth is closer than it feels but more importantly to help showcase why now, more than ever, as a publication/agency, we should look at our clients and our business operations with a sense of efficiency…to limit the bleeding on the decline while setting up for a massive rally. Sounds simple enough, but how do we do so? We can infer some d direction through Magna’s report:

                                            

Effect on Media Channels 

To the author’s point directly after the analysis of GDP:Growth, they admit that their regression model discussed above is based on an advertising market over the past 20 years in which the last 10 saw a massive change with the explosion of ad tech and substantially more ad revenue moving to digital channels. This lack of ability to include future variables on past data, provides two main opportunities for publishers and agencies to streamline their offerings to more cost effective ones while also taking note and closely monitoring emerging media channels & tech. I think the first opportunity is straightforward- if publishers can maintain advertiser performance while lowering overhead costs (data fees, mgmt fees, employee costs, etc.),  they should, in theory, improve profit margins/per client and limit the bleeding during this contraction phase. The second opportunity is more of a ‘watch and wait’ one in which I would like to point your attention to the 2008 recession…and specifically to The Trade Desk. Would you be surprised to learn that The Trade Desk was founded in 2009 in the midst of the 2008 great recession? I was, and I think it validates the overall underlying thesis of this write up – during times of hardship, those who find opportunity are poised to reap the rewards. During the recession, a handful of companies in the ad tech space saw an opportunity to more effectively streamline digital ad buying through the open market and thus TTD was born. As advertisers re-entered the market to regain SOV they had lost during the contraction phase, they began testing these new ad tech offerings promising more effective digital ad buying with more advanced attribution reporting and ultimately, the rest is history – TTD went on to grow by nearly 7000% over the 2009 – 2013 ad revenue expansion period while TV revenue continued to decline into 2010. I don’t suspect DP to be the leader in creating the next big ‘ad tech’ boom coming out of the COIVD-19 bear market, but do truly believe someone will find opportunities in this market. If we can identify emerging mediums and tech trends that advertisers are flocking to, we can hop on the train and provide our local clients with these hypothetical opportunities before our competitive local agencies/publishers do. What’s that saying? ‘The early bird gets the worm’…seems fitting. 

Changing Audience Behavior 

The above discussion on media channels and the ability to find/adapt to opportunities in a bear market was mostly focused around what we (DP) need to do during this time from the perspective of running a business and/or setting up for the expansion phase. However, we still have an obligation to our current clients, especially those who have stuck with DP, to produce and execute the most efficient campaigns for their goals. While that should always be the goal, I think the campaigns we are running require extra attention in the coming months to not only increase trust amongst our advertisers, but also in part because COVID-19 has changed a lot of consumer behaviors that will ultimately alter the effectiveness of certain marketing strategies in the long term (to be seen). Most of the short term changes in audience behavior stem around the increased media consumption as a result of the stay at home quarantine, but Magna Global believes these social distancing policies will cause lasting effects: 

“Meanwhile, the quarantine and social distancing policies are generating deep changes in attitudes, social norms (remote work, remote education), consumption (acceleration of e-commerce and online services), and media consumption (surge in TV viewing, OTT usage, and digital media). These shifts are likely to (at least partially) outlast the outbreak and change our society forever”

To expand in the short term Magna suggests the following trends by the varying media channels: 

  • Social: Increased consumption (up to 10+%). 

  • Search: No commentary on consumption but increased revenue moving to search given the boom expected in e-commerce. 

  • Linear TV: 2-3% increased consumption with upwards of +10% increase for Cable TV. Could be lower after quarantine if sports don’t resume. 

  • Connected TV: 8-10% additional consumption increase 

  • Radio & OOH: no projected decline, but Magna suspects radio & OOH advertising to get hit the hardest given less social activity outside of the home. 

    • Regarding Radio, I suspect while we will see a decline in traditional radio (am/fm) I am still very much bullish on audio and specifically digital podcast audio. I suspect Magna’s 9/2019 report on podcast audio will still hold weight even with COVID. 8% SOV of the audio ad spend by 2023 is still the projection. Read more HERE. 

Sources: March Report & Focus Report

While these are very short term outcomes of the virus, it will be crucial to monitor and adjust our clients advertising strategies on how these short term consumer behavior changes manifest after the stay at home orders are lifted. Again, I see these behavior trends manifesting as an opportunity…agencies who can identify how they manifest in respect to the macro outlook of their clients goals will outperform the clients competitors when there are overlapping goals 10/10 times. 

Recipe for Success? 

  1. Improve the efficiency of current client campaigns while also streamlining operational costs.

  2. Continue to monitor, test, and implement emerging media mediums & ad tech. (i.e. how we moved from underperforming tech in the geo-fencing space to a more robust platform with superior targeting and reporting capabilities).

  3. Closely monitor consumer behavior after COVID-19 and the effectiveness of advertising mediums in relation to changes in behavior and the advertisers respective vertical & goals. 

  4. Keep pushing and never stop fighting 

As you may have noticed, nowhere during my commentary did I suggest a single path as to ‘what’s next’ as I truly don’t know and frankly I don’t think anyone does. Yet, I hoped to convey a mindset of opportunity. One that is a realist in the current state of what’s to come…more pain, but provides an outline based on lessons from the past to drive positive and opportunistic thinking in the wake of this pandemic. If we continue to elevate our expertise, do best by our clients, and be a leader in this space, we WILL succeed and reap the rewards when the tides turn. 

Before I sign off, I want to provide you with a very powerful quote from VINCENT LETANG (EVP, Magna Global) that I hope you will share with your clients who are currently on the fence about pausing/canceling their advertising spend:

“Following 9/11, many brands cut their TV spend for weeks. But the brands that grew their national TV spending outperformed in business outcome over the next few months, as shown by their stock performance. In 2002, the S&P 500 was down by -22%; but some of the heavy TV ad spenders of 4Q 2001, saw massive stock growth, including Mattel (+12%), Nissan (+56%), and Bank of America (+14%). Whether or not consumers are in the right mindset to buy your products during a crisis, whether or not your product is even available in shops during that crisis, consumers like a brand that shares their will to resume normal life and normal business as soon as possible. Not only does advertising through a crisis make consumers feel positive and comforted by a brand’s commitment to its products and its clients (“Keep Calm And Carry On”), but it also keeps the brand top of mind in the eyes of the consumer, and better prepared when pent-up demand reemerges. Marketers willing to hold or increase share of voice during a crisis, while competitors withdraw, can win significant market share for a relatively low investment, as media costs typically slow down when demand dwindles.”

Stay safe & thank you for reading,

Tyler

Covid-19 and Your Business Model

Even prior to the disastrous outbreak worldwide of COVID-19, many small businesses were not running efficiently.  What does that mean?  In working with small, medium, and Fortune 500, 100, etc. the main differentiator that consistently sticks out is the lack of quantification in small businesses.

 

Consulting for many small businesses across different verticals, the glaring main common theme is most small business owners do not know their bottom line.  How can a business scale and grow if the business operator is unaware of what the operating costs are? What the supply costs are? What is the value of a customer? How many customers a month do you need? What is your payroll cost?

 

The key to understanding your business and quantifying your business is understanding your business model.  What is your business model? Your business plan helps to serve external factors of funding, understanding what you need to execute to secure that funding.  Your business model is for the internal use of understanding the operation of your business and how you will make money from your business. 

 

All business owners should understand their trends, sales cycles, latency, seasonality, customer profile to list the basics.  Trends help you align your marketing to peaks and valleys to keep your business consistent in down trends and capitalize in up peaks.  Sales cycle helps you understand how long it takes your customer to convert and latency helps you understand at what point do you begin interaction with your customer to what point they actually convert.  Seasonality is key for pricing and market share.  If you are a landscaper in say Florida the way you approach seasonality will be different than if you live in Colorado which has a limited landscaping window.  This is where supply and demand comes in to play and how to price properly.  Understanding your customer will help you understand what additional targets you can identify and target for additional market share and growth.  These key factors should shed insight into why quantification is key for small business health.

 

Business owners should know what their time is worth.  If a Chiropractor brings in $200/hour, pragmatically speaking it makes more sense for business health to outsource the “busy” work which may be marketing, payroll, accounts receivable/accounts payable and will only cost a menial amount hourly such as $35 an hour in comparison to the $200 it is costing for the business owner to take on a task they may not know anything about.  This is where a business owner should bring in a business consultant to help quantify their business.

 

To grow your bottom line or in most cases, know your bottom line, you have to quantify your business and understand the areas of opportunity based on seasonality, trends, sales cycle, latency and truly grow and capitalize on your business. 

TV is not Dying, but Evolving Yet Again – Our Take

TV is not dying but evolving yet again  

I saw this article last month by Korena Keys around the evolution of TV viewing habits and why she believes the shift from linear TV to an on-demand model is positive for advertisers. Ultimately, Keys’ take on OTT as an advertising channel in 2020 is intuitive and one I would like to dissect further. 

 

Advanced Targeting Capabilities: 

  • The most obvious value ad for TV viewing habits shifting to an on-demand model is advertisers’ ability to target their audience more granularly (demo, interest, behavioral, pod selection, the list goes on). With the on-demand model, we can layer data segments and programmatically serve TV advertisements through an impression model. This is a massive swing in the pugilism for TV buying where traditionally, national buyers would buy TV spots based on guaranteed GRPs and the cable/broadcast companies would serve the advert to everyone who tuned in… if the show didn’t produce the guaranteed GRPs for their demo, the advertiser would get free advertisements into the next show until the GRPs were fulfilled by the publisher. 
  • While Keys doesn’t directly mention anything about publishers, the on-demand model also favors TV publishers (in the long term) as they can optimize their inventory and allow advertisers to activate on audiences with little wasted viewing consumption. The live TV model led itself to a lot of GRPs that weren’t monetized as they couldn’t predict who would tune in, but with the on-demand model, publishers can put all of their inventory into the auction and allow advertisers to bid programmatically as soon as the audience tunes in. 

Lower Fraud

  • A point Key’s brought up that I hadn’t previously thought about is the reduction in fraudulent impressions by leveraging OTT in the current system. The value ad, here, is in comparison to the current landscape of programmatic display and video where advertisers currently spend billions of dollars/year on fraudulent impressions (projected to surpass $50B in fraud ad spend by 2024). With the current landscape of OTT, most networks have to directly connect to publishers’ private marketplace to gain access to OTT inventory (at least high-quality inventory). This encourages the networks to vet the inventory source as inventory is usually constrained making the audiences more expensive. Keys’ is essentially making the argument that because inventory is only available in closed networks it increases the price and maintains the integrity of the audience available through programmatic channels. I would also argue the reductions in fraud could also be correlated to the fact that a lot of the on-demand TV viewing sources require some sort of membership to view their content (TV subscriptions, paid subscriptions, or account registration wall), ultimately reducing bot consumption/impressions.  

Attribution Modeling/Reporting

  • The last point Keys makes is on how on-demand will bridge the gap between the historical segregation of TV buying and digital buying. They used to be completely different channels that required completely different tactics with little to no overlap in measurements. With OTT inventory available on the programmatic exchanges, it allows advertisers to, as Keys’ puts it, ‘ [to] better understand how audiences are interacting and responding to [they’re] commercial content…[they] know what percentage of their ad is actually being viewed by their target audience.’ It ultimately gives advertisers valuable information to make sweeping optimizations in real-time to improve the efficiency of their ad spend, across ALL marketing channels.  

Final Thoughts

  • OTT and the on-demand viewing model will prove extremely valuable for advertisers, publishers, and the audience alike. However, even with all the technological advances that make OTT so appealing in 2020, mostly around attribution/conversion reporting, I implore you to remember why advertising on TV content is and has been so appealing to advertisers for the past century – Branding. I fear that as the lines blur between video channels (i.e. in-banner video vs an engaging 30-sec tv spot), the industry will un-intentionally degrade the value of OTT and TV advertising through thoughtless ad buying and creatives that don’t resonate well with that channel. Before you add OTT to your advertiser’s media mix, ask yourself: 
    • Creative: does their creative work in a TV viewing setting? Sound on? 30-60seconds? High quality? Showcase their brand proposition?
    • Their current Mix: Does OTT make sense with their current goal? If they are very budget sensitive, OTT might not make sense and we can be creative in leveraging other targeted branding tactics that are less expensive (OTT will most likely see prices spike in 2020). 
  • Holistically, I am excited to watch this channel continue to evolve and seeing the value (and audience access) it can bring to the local market. 

Thanks for reading.

 

Are you interested in learning more about OTT and how it can benefit your business?

Whether you’re interested in OTT that offers advanced targeting, in-store traffic attribution, or optimization towards website conversions, we’ve got you covered. Drop us a note today and let’s get started!