As the media landscape progressively shifts, advertisers are reallocating their budgets from television and are instead focusing more on spending through retailers such as Amazon and Walmart, signifying an interesting turn in the advertising world.
The advantage of advertising through online retailers is the ability to accurately target the audience, a capability that typically lacks in television advertising. Retailers like Amazon possess a plethora of user data, which is $91 billion for the year to September alone. This information can be utilized by advertisers to target specific groups, enhancing the likelihood of conversion and ultimately increasing the return on the investment.
The noticeable shift of advertising dollars from traditional avenues to digital retailers can be seen in the most recent data. According to the Standard Media Index (SMI), the third quarter marked a significant increase of 63%, around $1.16 billion in total spending, directed towards online retailers. This figure starkly contrasts with the stagnation experienced within the television advertising sector, with only a marginal 1% increase, equivalent to approximately $8 billion in the same quarter.
As a result of this shift, retailers such as Amazon and Walmart are expanding their influence in the advertising industry and establishing themselves as key players. Amazon Advertising has made especially significant strides in this area, with its ad business expanding by 51% over last year, according to John Blackledge, an analyst at Cowen.
It’s not only the giant retailers who are benefiting from this new trend. Smaller retailers like Instacart and The Trade Desk have also seen growth in their ad businesses. For instance, Instacart’s advertising business grew a staggering 300% in 2021, clearly indicating growing advertiser interest.
One factor that might be driving this trend is the benefits of programmatic advertising, such as lower costs, higher flexibility, greater targeting precision, and real-time measurable results. Online retailers have mastered the art of programmatic advertising, with ubiquitous ads popping up in front of potential customers, exactly when and where they are needed. This form of advertising is far more personalized and efficient, making it incredibly appealing for advertisers.
The seismic shift in advertising strategies also reflects the impact of the global pandemic. With more people shopping online, advertisers have been quick to respond by relocating their budgets to digital channels where more potential customers are found. E-commerce sites, in particular, are proving to be very lucrative advertising platforms, considering their vast amounts of data about consumer shopping habits and preferences.
However, despite the apparent benefits, concerns are being raised around data privacy. Recently, laws and norms around data usage have become stricter around the globe to protect consumers. The changes could potentially impact the ease with which retailers collect and use data, presenting a significant challenge for online advertising.
In summary, advertisers recognizing the potential in online retailers for effective and targeted advertising is causing a significant shift in the way advertising dollars are being spent. These changes not only reflect adjustments in consumer habits but also signal an evolution in the nature of advertising as a whole. Innovations in the industry are showing no signs of slowing down, with online retailers set to continue their steady climb up the advertising ladder.