Watch Your Wallet, Online Shoppers. Limited Time Sales Not Always Best Deals

November 30, 2010 § Leave a comment

Cyber Monday is finally over. My eMarketer newsletter came amid a pile of sales alerts I didn’t sign up for.  Jeffry Grau from eMarketer said in a blog that cyber monday is losing its punch, for online shoppers started hitting place-the-order button even before “the pie is served”.
Facts:
On Thanksgiving Day, online sales increased 33% and average order value rose to $182.74 from $159.81 a year ago, according to Coremetrics.
On Black Friday, digital success ensued. Size of an average order went up from $170.19 to $ 190.80.
What’s worth noting is:
  • “Online retailers are making greater use of limited-time offers. This Thanksgiving holiday, online retailers dangled limited-time promotions in front of shoppers and adjusted prices on popular products to account for demand, supply and competitors’ prices, reminiscent of how airlines adjust prices for seats.”

There is a trend of growing limited-time offers, urging consumers to make quick and often ill-thought-out shopping decisions with a ticking clock. Even though online stores like bloomingdales.com would offer new deals when the previous end, each slightly different and not necessarily better than the other, the limited-time promotion still has a huge impact on consumer behavior, especially since threatening sold-out signs are broadly scattered. (I always wonder why is the product displayed at all if sold out?)

Check out my newsletter collection with time-warning signs:

Like Retargeting, Like-vertising, Likers…

November 28, 2010 § 1 Comment

RadiumOne, an online ad network, debuted its “Liker Targeting” feature early November. The underlying mechanism is simple: track down loyal customers, direct them to the brand’s Facebook page through an ad, and make them “Like” the company. There is really no rocket science here. Nothing revolutionary, or significantly different than retargeting ads, through which users are directed to a webpage, possibly an shopping site of a gadget you have been yearning for a while.

“The targeting methods will not only drive significant traffic to a brand’s Facebook page but increase the likelihood that consumers who go there will “like” the page,” the press release said.

But how can you cash in on “Likes”? How does it translate into profits? It is vital for brands to establish their own presence on social networks such as Facebook. But is “Like Retargeting” going to have a meaningful impact on the brands? I believe what the companies care is not just to increase the likelihood that consumers will “Like” the page, but that actual monetary results. Why make a detour when you can lead potential consumers to an e-commerce website and ask them to purchase instead of “Like”?

“Usually you see an uptick,” said Marc Ruxin, chief innovation officer at Universal McCann who is on RadiumOne’s board of advisors. “Social data helps. Does it solve the broad problem of display and low engagement rates? No, but it makes it moderately to occasionally a lot better than it is now.”

I’d like to see some real success cases of “Like-vertising”.

According to a 2010 Omnicom survey, over 20 million people “like” brand pages each day on Facebook. A click of “Like” takes one second and $0, whereas a click of “place the order” also takes one second, but costs your sweat and tears. That’s the difference.

Ralph Lauren 4D Ad Celebrating UK E-commerce Site

November 28, 2010 § Leave a comment

According to The Independent, the production was rumored to have cost a whopping $1.5 million.

Meaningful Comparison – Newspaper v. Online Ad

November 24, 2010 § Leave a comment

This is not news.

WSJ wrote a story about internet surpassing newspaper in ad revenue by 2014. According to PricewaterhouseCoopers’ Global Entertainment and Media Outlook, online ad, mobile excluded, is forecast to expand to $34.4 billion in 2014, while newspaper ad revenue continues to drop, hitting $22.3 billion in 2014.

“Shifts in consumer behavior, potential for inventory on the Internet, and increased broadband penetration in the U.S. are key factors in PwC’s projections, according to David Silverman, a partner at PwC.” (WSJ)

These three factors, shifts in consumer behavior, potential for inventory on the Internet and increased broadband penetration in the U.S. are what makes this comparison meaningful, for they are internet exclusive.

1. More and more people seek information online instead of from newspapers.

2. Newspaper has reached its capacity long time ago whereas there is still plenty of room for internet, whose place is larger in the first place, to grow.

3. The broadband penetration in the U.S. is 64% currently, and is still expanding. Newspaper circulation has been tumbling down since God remembers when, till a recent 5% reported this Oct, according to Audit Bureau of Circulations data.

 

Online Ad Revenue Hit All Time High

November 23, 2010 § Leave a comment

U.S. online adverting sales reached $6.4 billion in the 3Q of 2010, a record high since the earliest online promotion of Sears products by a company called Prodigy owned by IBM in the 1980s. To put the number into context, it represents a 17% increase from the same period in 2009. The report was conducted by Interactive Advertising Bureau (IAB) and PwC US and released on Nov 17.

“Marketers have embraced digital media because that’s where they can engage with their consumers,” said Randall Rothenberg, President & CEO, IAB, “This vibrant, innovative industry is creating jobs and contributing to the growth of the U.S. economy.”

“Advertisers are shifting more of their brand messaging online, accounting for this welcome surge in a difficult economy,” said David Silverman, a partner at PwC. “This trend reflects the accelerating shift in consumer behavior towards the internet and away from traditional media.”

Quarterly Revenue Growth, 1Q01 – 3Q10 (In millions)

For every one of these too-good-to-be-true reports as such, there are always skeptical voices.

tphilpot from New York posted a comment on adage.com, saying:” Very interesting – but didn’t traditional media ad revenue increase in the 3rd quarter, as well? Is this attributable to an “accelerating shift in consumer behavior towards the internet and away from traditional media” or a recovering economy?”

LudvikPlus from New York wrote:” Why in this world traditional still leads ad expenditure in US?”

I would say it is a trend that online advertising is growing at a faster pace than that of traditional media. However, it is somewhat meaningless to compare online with traditional ad at least for now. According to data compiled by eMarketer, total ad spend in the U.S. is $166.5 billion, with a growth rate of 2.3%. Online ad spend accounting for 15.1% for total ad sales in the U.S. is $25.1 billion, with a growth rate of 10.8%.

First and foremost, traditional media includes newspapers, magazines, television, radio etc., while online advertising only represents itself.

Second, it is true that there are more websites than the number of traditional media combined. However, the audience size of websites, on which advertisement relies, varies more greatly than the audience of newspapers and televisions. Plus the price of advertisement also varies, from a couple of dollars to a 30-second Super Bowl ad of  $3.01 million. Even though the formula for revenue is quite simple, number*price=revenue, it is hard to estimate if online ad revenue should exceeds traditional ads.

Third, quality issues. I haven’t found any data on earnings per dollar paid for online advertising. No surprise, it is almost impossible to track each consumer with a particular ad, since most companies incorporate numerous forms of ads in their campaign. Generally speaking, I think, traditional ads still outperform online ads in terms of generating revenue for retailers. According to a comScore report on Nov, an average U.S. internet user was delivered more than 6,000 display ads during the three-month period. Imagine how many of those ads have any influence on your purchasing behavior or decision making? Probably very few. When people are bombarded with online ads, they turn off their radar and ignore every one of them. Now think of the ads you saw while reading a magazine? No matter how quickly you flip through, there has to be a sufficient amount of time for you to read the colorful page for it to make an impression on you.

At least, that’s my personal experience, when I read Vogue, ELLE or Marie Claire, the ads seem much less annoying that those usually poorly-made unthoughtful (no offense) ads online, especially the perfume magazine ads with fragrance emanating from the paper.

Multi-tasking Google Revisited

November 21, 2010 § Leave a comment

Google epitomizes the new geekiness: jack of all trades, master of even more. You would expect computer nerds do only well in technology, programming, algorithm, etc…. Not any more. They also do well in fashion. Last week has witnessed Google’s expansion toward an area that is previously deemed out of its reach.

On Wednesday, Google launched Boutique.com, a fashion e-commerce site that allows users to search for products with Google’s power search algorithm. Retailers pays Google by clicks, which direct consumers to their shopping sites. There are already numerous websites specialized in what Wikipedia calls “discovery shopping search”, such as TheFind.com, Like.com and Shopstyle.com, the third being my favorite.

Rumors emerged Friday that Groupon.com, the leading coupon-offering e-commerce site localized to different major markets, is considering selling itself to Google, with the management group leaning toward a sale, according to Bloomberg.

According to Bloomberg, “Schmidt is using takeovers to lessen his company’s reliance on ads placed alongside search results and move into new areas, such as display and mobile marketing messages.” Bloomberg also said Google has accelerated its dealmaking in 2010, spending $1.6 billion on more than 20 companies in the first nine months of the year.

Google has acquired Slide.com, an innovative social technology company in August; ITA, a MIT-scientists-founded travel industry software company in July; Metaweb, a company that maintains open, free database in July; AdMob, a California-based mobile advertising company in May……

It seems a little reckless. However, Google is now focusing on social network and e-commerce, I would say by acquiring many start-ups, it is trying to increase the stake of winning.

For Google, with more than 20 million users and a worth of arguably $3 billion, Groupon, is certainly a great deal for Google.

Groupon will gain more traffic from Google and save a huge amount of advertising expenses (since it is automatically advertised on Google). At a time when the population of online shoppers grow (“E-commerce spending during the holiday season is expected to reach $38.5 billion, up 14.3 percent from 2009, marking the second straight year of double-digit e-commerce growth, according to a new forecast from eMarketer“), Groupon has great potential even without the peddling from Google.

According to Larry Dignan at ZDNet, Google provides a spectrum of services, which makes going elsewhere for information unnecessary. “You find that restaurant on Google, you get a nice map for directions, you get a few reviews and you can hand out a coupon for drinks or some discount. If you want a premium mashup toss in a deal of the day with Google services.”

The sentiment is overall positive. However, there are some dissenting voice. While questioning whether the number-specialized Google are able to do well in other areas, Niall Harbison raised a very important issue — the problem of slow integration, without which the previous discussed benefits won’t exist in the first place. Quoting the example of Dodgeball, a social network software, which was acquired by Google in 2005 and was discontinued in 2009, he said “The key to the ongoing success for Groupon is speed and how quick they can roll the service in to other cities and countries. Competitors are springing up all over the place and Groupon need to keep growing as fast as possible and having the distraction of a complicated deal might not be the best thing in terms of their growth.” However, I would expect Google to learn from past experiences.

He mentioned another problem: margins will get squeezed since the business model is easy to copy, which I think is of lesser concern since once a huge users pool is built, as in the case of Groupon, it is hard for them to shift to other similar sites without any strong incentives. I mean, so far we haven’t seen another social networks stealing market share from Facebook or Twitter after all.

The biggest concern is that as Google transforms into this giant web monster, crowding out businesses offering similar services, it may end up doing a disservice to the economy. But it is something they will never, or probably shouldn’t care about.

Clickthrough Rate (CTR): Abracadabra! Stop Declining

November 18, 2010 § Leave a comment

Good news. CTR has stopped declining first time since July 2007.

Based on the analysis of MediaMind, a digital ad solutions provider, annual average click rates worldwide have “plateaued” at 0.09%. The initial drop was caused, ironic but not counterintuitive, by the success of online display ads, an overwhelming amount of advertisement flooding into the virtual world. According to eMarketer, “As users saw more and more ads across the internet, many continued clicking, but not fast enough to keep up with the expanding inventory. Clickthrough rates fell steadily until reaching an equilibrium.”

“Although CTR is only a partial measure of online success, the leveling of CTR shows that online advertising has reached a level of maturity and that advertisers have become more sophisticated in luring users’ interest,” said Gal Trifon, CEO and co-founder at MediaMind, in a statement.

Is it? Are advertisers becoming more “sophisticated” in pandering to users’ interest?

“Luring”, GENERALLY speaking, is an offensive word to consumers, for whom outright and sometimes implacable hostility toward the incessant pestering of online ads is the norm. There is no denial that users have become more rebellious these days. No one is willing to admit that they have fallen into the trap of a distracting enemy. (I’m not talking about quality-guaranteed Tiffany & Co. display ad on the homepage of the New York Times, but rather online ads in general.)

I couldn’t help but wonder, are internet users becoming more tolerant towards online ads and actually find them helpful, or is it that advertisers are doing a better job at hiding the little cross close button usually displayed at the upper right side? It happens to me all the time, I would accidentally click through an ad while recklessly fumbling for the close or shut-up button of the ad.

*Disclaimer: My bias, or put it more accurately, mixed feelings about online ads comes from my personal experience in China, the constant startling effect, coarsely-made video ads bring me when they jump out of nowhere often with ill-taste extra-loud music. (Has anyone ever noticed that TV advertisement is louder than ordinary program? I usually have to turn it down when the ads begin.)