There’s two trends around Product Advertising that we have seen emerging recently, and this post is at the intersection of the two:

The proliferation of product advertising formats to Social Media Platforms andThe use of product feeds as a technical basis for Advertising.

This article will add some context around these significant trends and take a stab at what might be next.

Product advertising is the domain of retailers, an industry that accounts for 24% of all search ad spend and 20% of display in the US, according to emarketer. Interestingly, Product Advertising figures in both numbers, guised as retargeting ads in display and Shopping ads on search engines. Display advertising is often used for retargeting shoppers who visited a site, but didn’t buy anything and to attract similar shoppers using audiences (more on that later).

Product Ads on search are primarily used as a product discovery tool, a way to entice new customers into your online shop when they are looking for a product.

Product advertising, both search and display, has been dominated by Google. And while that still holds true today, other online players are slowly, but surely, gaining traction in the Product Advertising part of the Digital Advertising market.

You can see in this projection based on data from emarketer, that other feed-based advertising platforms are expected to grow more dynamically than Google in the coming years.

From this “All others” category in feed based product advertising, three other companies deserve a hard look by retailers: Facebook (for its sheer scale), Pinterest (for its promising niche) and Amazon (for its pioneering native product ads).

Let’s take a closer look at each of these new product advertising channels and look into the glass ball what might be next.

Facebook Dynamic Ads

Facebook's flavor of feed-based product ads goes by the name of Dynamic Product Ads, which have been around since 2015 and are now available worldwide. The idea behind Dynamic Product Ads is basically retargeting, except that Facebook brings a rather unique capability to this discipline.

Facebook comprehensively logs their users’ activity on the platform and across the web, through the ubiquitous Facebook ad, login or sharing pixels. This pixel data combined with the personal information FB already have, enables them to surface ads that are highly targeted on their own channel and across other channels.

They are able to target specific individuals who have shown interest in an item as well as other people with similar interests or characteristics (usually called lookalikes) Their AI powered targeting algorithm recently featured in a NY times article.

Examples of ways retailers can use Dynamic Ads include targeting:

People who viewed a product online, but didn't buy,People who have bought a product within the past 30 days,iPhone users who viewed a product on their mobile (by showing them a discount coupon on their desktop)

Facebook has proven to be an extremely popular advertising platform with more than 4 million advertisers published in September 2016 - most probably the right choice, as the opposite strategy has cost Snapchat dearly this year.

The ease of use and “low cost, high ROI” have made Dynamic Ads popular with large and small advertisers alike. The barriers to entry for advertising on Facebook are rather low for retailers as well. Facebook will ingest your Google product feed and additional requirements are limited to the Facebook retargeting pixel.

What’s next for Facebook?

In the future, we foresee the development of Product Ads to include video, which will make a large part of the Facebook's video revenues eligible to figure in our forecast.

Dynamic Product Ads are set to benefit from this development to a larger degree than Google or Amazon's search based products, simply because the browsing and entertainment focused mode of using a platform like Facebook is better suited to the consumption of video content.

With feed-based video advertising, Facebook would be able to take the marriage of brand and performance advertising to new levels of accountability and effectiveness, making them an even more desirable advertising platform.

In addition to richer ad formats, Facebook has begun using “broad audiences” of people that have shown interest in similar products to yours, so it is basically accessing shared audience information. A move that is set to open more opportunities for feed-based product advertising beyond retargeting, broad audiences essentially enable marketers to access targeting-relevant information about users before they even visited any of their properties.

With broad audiences, Facebook thus implemented the first feed-based product ad format of a class that we have forecast to access prospecting budgets - a major step for the tech in terms of maturity on the one hand and regarding business impact on the other hand.

Last but not least, Facebook’s integration of Instagram is interesting as well. By adapting ad products and the sales experience from the mother company, business-wise Instagram could get a head start amongst the mobile focused second generation social networks.

Pinterest

Pinterest is the least mature platform in terms of product advertising. They are still experimenting with different ad formats including Promoted Pins and Buyable Pins (still in beta). For its third ad product, called “Search ads”, Pinterest is in close collaboration with bid managers Kenshoo, and are currently in open testing with Barilla, eBay, Garnier, Target, The Home Depot and Walgreens testing the format.

Despite its relative immaturity, they have around 150m monthly active users, performing 2 bn searches. More interestingly, Pinterest says that these searches are almost all non-branded (97%), which positions them higher up the funnel than pure Shopping channels and more in the buying realm than Social channels.

Brands advertising on the platform reportedly see a high new customer rate, which seems logical considering Pinterest’s female skewed core audience that uses the mobile app mainly in discovery mode.

What’s next for Pinterest?

Pinterest is catching up on many fronts at the same time, and with key hires from Google and Facebook, they should be on a good road to update to feed-based ad formats and an API, which are the ingredients for efficient ad management.

Pinterest is a potential candidate to take the business of feed-based product ads beyond just the catalogues of large retailers seeking efficiency. Feed-based product ads also hold promise for smaller catalogues to achieve greater effectiveness through dynamic creative optimisation based on feed information.

All this while expanding geographically and on the product side defending the “visual search” niche against Google and Facebook.

Amazon

While you would not think of Amazon as a social network first, Amazon clearly has elements of one: think user generated content, prime membership or - most strikingly - the Spark App they debuted this year.

But the advertising side is where things are getting really interesting with Amazon - a.k.a. The probably most comprehensive shopping profiles available in the world of e-commerce (and ever more adjacent fields).

Interestingly, the Amazon seller center which houses the PPC backend, is not very well adapted to the advertising use case yet, but it is fundamentally a logistics page. Its KPIs and graphs are less complex than in Google AdWords (clearly the benchmark for dedicated advertising platform), making it seem to be chiefly aimed at the casual advertiser.

The simplicity of setting up and managing sponsored ads on amazon.com has lead more than 20 thousand sellers to adopt them (according to Amazon) as a way to make their products stand out. For the most part, these sponsored ads are targeted at SMBs, job openings at Amazon reveal they are working on a cross-functional team to bring to market a portfolio of advertising services.

For Amazon to monetize their audience data better, they will need to apply their supreme knowledge of audiences with brand budget beyond their own properties, as Facebook has done with their network. Which is where AAP comes in. In Amazon’s own words:

"Using the same personalization engine that drives advertising on Amazon.com, AAP offers more options to extend the reach of media campaigns, without compromising audience quality. The combined reach of Amazon audience on our owned and operated sites plus our audience on other sites around the web dramatically increases scale and efficiency for advertisers."

What’s next for Amazon?

Speculations around Amazon abound, but focusing on the advertising business the tools they put at the hand of marketeers are clearly in for an overhaul, as an e-marketer report recently echoed. They will continue to unlock new budgets for their flavour of product advertising, appealing to logistics and distribution-focused people in their market approach.

Native Product Ads

The success of sponsored ads on Amazon, has lead several other large retailers to explore offering Native Product Ads (also called Sponsored Product Ads, Promoted Listings, Promoted Product Ads (PPA)) on their own websites.

Whatever you call them, they represent an advertising format that allows brands to pay for better placement on the websites of retail marketplaces such as Walmart, Amazon, eBay.

For a CPC fee paid by the brand, a product’s visibility is boosted to the top of the organic results, increasing the likelihood of a sale. These ads are cropping up on category pages, search results pages, and product details pages.

Source: Kohls

Similar to the display ads you’re used to, these ads work by going through a third party Ad Networks or DSPs which manages the bids from brands and surfaces the products on the retailer’s website.

Traditionally these ad networks have been dominated by a select number of players which hold a monopoly on the brands they represent, leading to poor ad-fill rates and irrelevant ads.

At Crealytics, we’re building an Open Exchange to widen the pool of ads from which retailers can choose from and provide greater visibility into ad performance.

Conclusion

There can be no doubt that the future of product advertising is feed based. Feed based advertising is growing more dynamically than the total advertising market. While Google may be further along the path than the others, we predict that their market share will continue to decline as services like Facebook, Pinterest and Amazon grow and expand.

As Native Product Ads become more popular and new platforms emerge, the overall size of the Digital Advertising pie is set to grow - without any clear sign that Google might be able to participate in that growth.

Jorn Seiler

Digital Strategy Consultant at Crealytics
Jörn is a consultant in the Business Intelligence team at Crealytics with 15+ years of experience in Media, Marketing Research and Digital Analytics. Jörn is an insights specialist with international experience on the agency side as well as the client side.
Jörn is a consultant in the Business Intelligence team at Crealytics with 15+ years of experience in Media, Marketing Research and Digital Analytics. Jörn is an insights specialist with international experience on the agency side as well as the client side.