For traditional CPGs, stagnant sales growth has resulted in more pressure than ever to reduce marketing costs while maintaining or improving results.
Lower costs, superior results tracking and (putting aside fraud) supposedly better ROI are, of course, what’s pushed CPGs in recent years to shift more of their combined $225 billion (including trade and consumer promotion) in annual marketing spending to digital. Digital advertising edged out all forms of traditional advertising among CPGs as of 2017, when it reached 16% of the total, according to Cadent Consulting Group.
Google continues to be by far the dominant U.S. digital advertising platform, capturing about 37% of total digital ad spending last year, according to eMarketer. Facebook, driven by mobile advertising, is second, with 20.6% share.
But Amazon is showing triple-digit growth, and is now the third-largest advertising platform. eMarketer estimated that the ecommerce giant’s U.S. ad revenue doubled in 2018, to $4.61 billion, or 4.1% of total digital ad spending — and projects that it will rise to 7% by 2020, while Google and Facebook will each see their shares decline by a few points.
Amazon is drawing ad money away from programmatic display ads and ads bought directly from media companies, per IPG Mediabrand’s Reprise, but it’s apparently also attracting significant dollars from Google.
Although Google as a whole is still showing growth, some of that may be because advertisers are moving some money to YouTube and other Google properties — while Google’s search revenue growth may already be starting to flatten. And that, suggests CNBC, could be because, according to media-buying agencies, some CPGs are moving 50% to 60% of their Google search budgets to Amazon, adding up to many hundreds of millions of dollars per year. (The shift is taking place mostly among CPGs — core Amazon products — as opposed to other big advertiser categories like automotive, travel and entertainment, CNBC reports.)
Amazon’s appeal is hardly a secret: A seamless ecommerce experience that generates massive customer purchase and other data that’s sheer gold in driving ad targeting and tracking actual purchase results.
“One exec from a large agency said some brands find Google search ads ‘quaint’ and want their budgets moved to Amazon because it directly correlates to sales,” wrote CNBC. About 49% of product searches begin on Amazon, according to Survata, and Amazon surpassed Google in product searches from 2015 through 2018, according to Jumpshot, it pointed out.
Bottom line: “In many cases we see Amazon is the better performer and by a significant margin,” summed up Joseph McConellouge, head of e-retail ad buying for Reprise. Indeed: 97% of Amazon advertisers surveyed by Feedvisor said they find that advertising valuable.
Further, CPGs are realizing that “the more they spend with Amazon, the more they can add other bells and whistles such as content or reviews that can help encourage more sales.”
Walmart Doubles Down On In-House Ad Platform
But Amazon itself is now starting to face serious competition for CPG ad dollars, as Walmart and a growing number of other legacy retailers invest heavily in ramping up the capabilities of their own ad platforms.
Being the world’s largest retailer, and so the most obvious threat to Amazon, Walmart’s advertising push has gotten most of the attention. Walmart draws 300 million shoppers per month to its stores and about 140 million to Walmart.com (not counting Jet.com), according to Forrester, versus Amazon’s 200 million per month. But its own CEO, Doug McMillon, has said that up to now, its ad business is “tiny,” because it hasn’t monetized that data.
Walmart is now pushing hard to change that. It brought its ad sales business in-house and consolidated the business and its data across its stores and sites to enable an omnichannel targeting and measurement solution.
Just last week, it acquired digital advertising start-up Polymorph Labs to hone ad targeting through use of Polymorph's high-speed ad server, self-serve interface and server-side header bidding (which will at some point allow for real-time auctions across multiple pricing models, according to TechCrunch).
Albertsons Sees Impressive Ad Platform Results
Other retailers are also making up for lost time. Kroger plans to leverage its new marketing unit, which places web ads for “the likes of Unilever and General Mills,” to generate a portion of $400 million in additional profits projected by 2020, and Target’s “hundreds” of in-house media network clients include Mondelez International, according to Bloomberg.
Coca-Cola, currently running two campaigns with Ahold Delhaize’s Peapod Digital Labs, told Bloomberg: “It’s always been elusive to tease out the impact of the digital media we've run,” but with these campaigns, “we will have a better idea of what our return on investment is, and that gives us encouragement to invest more.”
Other grocery retailers — along with some of their normally closed-mouth CPG customers — are starting to report impressive results from proprietary ad platforms.
A notable example: A year after launching its Albertsons Performance Media (APM) marketing platform, that retailer — which operates 20 grocery banners across 34 states — is delivering return on ad spend that’s as much as two times higher than industry benchmarks set by Nielsen. That's according to Quotient Technology, which powers APM, in a release made in conjunction with Albertsons and CPG partners.
Quotient — the marketing tech company that owns Coupons.com — uses proprietary promotions, media and audience and analytics platforms to deliver personalized digital promotions and ads for hundreds of CPG companies, driven by a 100-million audience of verified buyers from partnerships with retailers including Albertsons Companies, Kroger, CVS, Walgreens and Dollar General.
The APM platform has executed 300 campaigns for 150 CPG companies, using social media, the grocer’s digital properties, and large third-party publishers,
One example: Pepsi’s 2018 Generations Summer Music Campaign, which highlighted the brand’s music history on limited-edition retro cans. APM connected locally relevant Pepsi music assets with shoppers across Albertsons’ banners. PepsiCo Shopper Marketing Director Stacey Nachtaler confirmed that the resulting sales outperformed the rest of the grocery channel during the five-week promotion, adding that PepsiCo was working on more campaigns through the APM solution.
General Mills Sales Director Ed Madden reported that using APM in conjunction with (now Quotient-owned) Ahalogy, which delivers premium content across social media for CPG brands, resulted in high impressions and “an impressive click-through rate to the Albertsons banner coupon page from our influencer content.”
Albertsons is now working with Quotient to implement sponsored search and product placements to drive high placement for brands on Albertsons’ banner store sites.
Another grocery chain, Giant Eagle, has expanded existing shopper media programs with Quotient to create its Giant Eagle Advantage Media ad platform, reports CPGmatters. Using Giant Eagle shopper data, the platform offers ad targeting; ad and content personalization; message delivery across the retailer’s mobile and social channels, on Coupons.com and on third-party properties — and, of course, measurement that links ad views to shoppers’ purchases.
Meanwhile, in Canada, Loblaw reports testing a service that uses its PC Optimum loyalty program — which provides more than $1 billion in rewards annually — “to personalize advertising for customers and reward them for seeing those ads while browsing online,” reports Supermarket News.
“Currently with more than 18 million members, PC Optimum has provided product offers and ads to shoppers via Loblaw online channels and email based on their previous purchases in the retailer’s store network,” writes SN. “Now, this approach will be used to deliver more relevant ads from trusted consumer-brand advertisers as members browse the Internet or use social media — that is, in places where they already see ads. Plans call for Loblaw to pilot the new service with a group of selected members, providing them with an easy way to earn additional points…”
While some analysts believe that only retailers with major scale will be able to stay in the game and compete effectively with Amazon and the social platforms over the long term, what’s clear is that this development seems a virtually no-lose one for CPG companies — which stand to benefit from the investment being lavished by all of these players in order to compete for their ad dollars.
I say “virtually” no lose because there is one major potential threat to all of this continually improved targeting: growing consumer privacy concerns. But that’s a topic for another column (or 20)…