When you shop online, you probably start with a Google search. But for most products, Google redirects you to an e-commerce site like Amazon. Despite initiating the transaction, Google receives $0 in referral commission.
Until recently, that process applied to products found not just through Google, but on every social media site. But the goal of Google’s Shopping Actions and the Facebook “Buy” button isn’t simply to get a slice of those sales. To succeed in sponsored marketplaces, retail brands need to understand why online platforms are developing them at all.
Sponsored marketplaces are well positioned to influence the next wave of e-commerce.
CX Is the Start
Online, the customer experience is king. Tech giants like Google and Facebook know clearing the path to purchase is key to boosting conversions.
Redirects are a major barrier to that. When Amazon allows them to buy with a single click, shoppers will give up rather than click through multiple pages. Nearly seven in 10 online shopping carts are abandoned, 26% of which are due to a cumbersome checkout experience.
“A longer, more complicated checkout means more time and steps for potential customers to change their minds and abandon their online shopping carts,” explains ShipBob CEO Dhruv Saxena. Online shoppers don’t like being kicked around at checkout any more than people who call customer service like to be transferred.
The simpler search and social sites can make their shopping experience, the more commission money they stand to make. But their real play isn’t in increasing conversions; it’s in using those higher conversion rates to win more ad dollars.
Ads Are the Endgame
Although Google has its hands in everything from email hosting to paid apps, its cash cow is display advertising. About $0.83 of every $1 that Google’s parent company Alphabet makes comes from ad sales.
The search and social media giants know that advertisers choose online channels by conversions. One reason that Amazon has started to steal market share from Google’s ad business, according to Wunderman Thompson executive Shane Atchison, is that Amazon can tell advertisers if their ads actually led to purchases on the site.
With buy-from-search functionality, Google will be able to attribute purchases to specific searches. Expect Facebook, Instagram, and YouTube to tout their abilities to tie on-platform purchases to ads and posts as well.
Whether Google will retain its dominant position in that sort of ad ecosystem remains to be seen. Whatever happens, retail brands both small and big need to start jockeying for their share of social- and search-based shoppers.
Winning in a One-Click World
Retailers have no reason to complain about better online shopping experiences and more effective ads. Still, they’ll need to get in on the ground floor to experiment and preserve their brand.
“Deploy to any new marketplaces that will be opening up in the near future — including Google, YouTube and Gmail,” suggests Trevor George, CEO of ad agency Blue Wheel Media. Once those marketplaces are large enough that retailers can’t ignore them, George predicts, they’ll adopt a pay-to-play model that requires advertisers use paid sponsorships to succeed. If he’s right, retailers that start early may have the scale to keep growing based on organic reach alone. That’s especially important for smaller businesses with smaller budgets.
Of course, not all of these marketplaces will prove successful or valuable to every brand. As they open up, bet a little on each. Think of it as the cost of experimentation: Even if Instagram users don’t bite, $500 is a small price to pay to learn that your ad budget is better spent elsewhere.
More difficult and costly is brand management in the age of fractured marketplaces. Look at what’s already happened on Amazon: 83% of sales go to the company in the “Buy” box. Sellers need exceptional branding to stand out in that sort of environment.
The solution is the same one that search and social media firms are leveraging themselves: a better customer experience. Across industries, 89% of companies compete primarily on CX.
Be the sort of brand customers want to work with: Offer fan-favorite (and conversion-boosting) features like free shipping. Err in the customer’s favor when there’s a miscommunication or product issue. Give customers an array of channel options for sales and service.
The early days of e-commerce were all about brand websites, but the next chapter will be written on social and search platforms. If anything, the result will be even stiffer competition between brands. To win on sites like Google and Facebook, act like them: Be one of the first, best, and most agile brands in each marketplace, and let your customers take it from there.