Impact Of Ecommerce On Digital Ad
When you think about the marketing of brick & mortar business, the first thing that comes to mind is pamphlets, billboards and newspaper Ads; similarly, digital advertisements resonate with ecommerce marketing.
Brick & Mortar Shops or Mom & Pop stores target the users in their store's vicinity and hence the usage of above-mentioned marketing mediums, as that's the only and best possible way to advertise the brands in front of the customers who can physically visit their shop, but the biggest issue with such mediums is targeting, as while they are showing the ads to everyone in that area, but if the user is interested or not, or is a right audience for their brand or not and hence have to spend a lot to cover as many people possible (which we call Spray & Pray Method), resulting in lower ROAS.
Taking the case of ecommerce store, their audience base is not limited by the vicinity of the store, as anyone can access the online store globally, but with the serviceable areas (where the delivery of goods is possible); further with the technological advancements in the advertisement technology segment, its very easy to show the ads only to the users interested in the goods or services offered by the store, and hence higher ROAS.
Ecommerce brands spend their advertising dollars into multiple segments, which cover both the traditional and digital advertising mediums, but the reason and strategy for using both are way different. The budgets on traditional mediums are spent for exposure and creating brand recall and are done generally by big ecommerce platforms, which are global and have many competitors and hence the requirement. The biggest advertisement spent of all the ecommerce stores irrespective of their size & serviceable areas, goes to digital advertisements, purely because such mediums are measurable, highly targeted and bring higher ROI in terms of the performance (Sales of the Goods & Services).
As per the estimates & various reports, small & medium ecommerce platforms spend over 90% of their Ad money on digital channels, while the larger ecommerce businesses spend as much as 60% on digital channels. Having said that, these numbers are changing rapidly in the favour of digital channels, as not only do such channels acquire the users, but also have enough analytical & attributional data, which helps the brand in further optimizing their ad spends.
Talking from Indonesia's perspective, which is the World's third biggest population in the middle household income group, with high penetration of internet & smartphones and cheaper internet packs, eCommerce is booming like never before. As per the report, Indonesia was the 9th biggest ecommerce market globally, with an estimated value of USD 43 Billion, and an estimated growth rate of 32% Y-o-Y. As per the statista, over 44% of Indonesia's population have bought at least 1 product / service online by 2021, which shows an informed audience base, high reach of ecommerce platform & a robust delivery infrastructure.
We are seeing brands like Tokopedia, Shopee & Lazada spending Millions of Advertisement Dollars monthly on digital & traditional channels, but smaller ecommerce brands / drop-shipping ecommerce businesses are spending heavily on digital channels as well. The key difference in the spend patterns is, that the bigger brands have the leverage to bifurcate their ad spend on multiple platforms like search, social, affiliate, OEMs, sponsorships etc. but the smaller brands are limited to search & social mediums only, as for smaller brands, it’s a sure-shot way towards sales with lower acquisition costs.
The amalgamation of data & technological advancements like Artificial Intelligence, Re-Marketing, sophisticated audience targeting mechanisms, performance measurability & premium ad placements, have created a new breed of digital advertisement platforms, which is now becoming a force to reckon with.
As such channels are not being used only for performance marketing, but for brand recall and exposure as well, in terms of the OTT & CTV Advertisements. Bigger brands are leveraging such platforms to acquire new customers via performance marketing channels, and then running brand recall campaigns for such users only, helping them to keep the user engaged with their products & services, and hence such users have higher LTAV along with brand loyalty.
To conclude, all I can say is that ecommerce businesses can sustain & grow in this highly competitive industry only if they have a clear digital marketing strategy and the right partner to help them.
*The author is Ramneek Chadha, COO, Xapads Media
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