UK online retailers missing out on 1 billion ad revenue
Advertising space on e-commerce sites is worth up to a billion in revenues, yet a large fraction currently finds itself unused. In recent research from OC&C, the consultancy finds that many UK advertisers are worried about losing customers to the advert or negatively affecting their consumer experience. These worries may simply be phantoms however, with US giants like eBay and Amazon finding that online advertising does add value.
In recent years the market for online sales has been booming. According to data from A.T. Kearney, the global ecommerce market is set to grow from $840 billion last year to more than $1.5 trillion in 2018. With the industry on the rise, so too is the potential for monetising the potential of advertising.
However according to recent research from Google and OC&C Strategy Consultants, online retailers are currently not fully capitalising on the advertising potential. As it stands e-commerce sites in the UK enjoy 7.5 billion page views a month and make £150 million in advertising from that traffic, while in comparison, news websites enjoy only 3 billion page views a month yet make approximately £400 million in digital media revenues.
The authors highlight that it is partly a conscious decision – UK’s e-commerce sites are kept bare of advertising. Yet one with a large financial backdrop; OC&C and Google believe that the missed revenue from not selling online advertising space to third parties – along with other products on e-commerce sites – means that retailers collectively are missing out on up to £1 billion in revenues.
Key reservations for the deployment of revenue generating advertising on sites include “concern about cannibalisation, the customer experience fear-factor and low levels of awareness”, says Anita Balchandani, partner at OC&C Strategy Consultants.
Cannibalisation occurs when a visitor leaves the e-commerce site for another through the advertising links, while customer experience factors relate to the disruptive nature of advertising to the consumer experience. A third factor affecting the implicit decision of UK retailers stems from the fact that many don’t understand the full potential benefits of the advertising channel: “Eight out of the top 10 US retailers including Target are pursuing a meaningful on-site monetisation strategy,” comments Balchandani. “In the UK it is two out of 10 – just Amazon and eBay.”
American styles
Yet with the vast majority of US retailers engaging in advertising through their e-commerce sites, the worries expressed by UK retailers have already been shown to be without merit. According to EBay director of advertising sales, Phuong Nguyen, data collected about the behaviour of customers on their ad-enabled e-commerce site shows that more value is generated from advertising than is lost: “Without that data we would have never squashed the emotional debates around whether advertising is good or damaging to the business,” says Nguyen. “Data takes all the emotion and hopefully a lot of politics out of decision-making.”
Amazon, another retailer that engages in the practice, finds that through leveraging advertising space on their e-commerce site they are able to provide further benefits to consumers, including creating ads that engage users through leveraging past sales information about the user to create well targeted ads that benefit both the consumer and vendors. The benefits for Amazon are considerable, the company made £402 million in advertising revenue in 2012 and it is estimated it was on course to have sold almost £660 million in advertising last year.
