The economic sun is shining, but is your e-commerce strategy beach-ready?
Marketing budgets are in rude health, but a lot has changed in performance marketing since the economy last experienced growth. Will Ashton of Nest Commerce explains how to ride this wave of optimism.
The sun is rising on a new era of performance marketing thanks to the rise of short-form video / Rachel Cook via Unsplash
British summertime remains as unpredictable as ever – but a sunnier mood, a mood of change, still sweeps the country. We have a new government promising to take the country in a new direction. Meanwhile, consumer confidence, economic growth and inflation are all moving in a positive direction.
This optimism is reflected in the budgets of marketers, with IPA Bellwether showing UK marketing budgets in their best health for a decade. Growth is the goal – for both the new Government and retailers alike.
Yet, brands looking to scale in this favorable retail landscape will find that performance marketing works very differently today compared to the last time we saw real growth back in 2021.
Brands have faced years of stagnant performance with agencies or in-house teams that haven’t moved with the times. Against a backdrop of fear of economic challenges and slashed budgets they have clung on to outdated bottom of the funnel tactics, which have amplified problems.
The new approach
As we approach the crucial Q4, the ecommerce landscape is marked by rising customer acquisition costs and a decline in brand search visibility. It is crucial for brands to target new audiences and build brand preferences and to do it fast.
Search, that bottom-of-the-funnel mainstay, has certainly become less effective in isolation. Our latest Readout report, which analyzes global data from 40+ ecommerce brands, found that cost-per-click pricing has risen by 49% year-over-year. This puts pressure on strategies reliant on the channel.
Meanwhile, progressive advertisers who invested in building their brands are surging ahead. The method for delivering effective online marketing has changed. This new approach is full funnel and social first – from initial brand awareness, through to closing a sale. And it relies on continuous experimentation and cross-channel creative rotation.
Meta matters
According to our data there has been an astonishing 4.2x year-over-year increase in awareness campaigns on Meta. Overall, there is a 57% year-over-year increase in average ad spend across Meta platforms. This is up 5% from peak season, Q4 2023, as advertisers reinvest on the back of the growth that delivered.
But the right approach is crucial. In tests we conducted earlier this year, brands running awareness or traffic campaigns alongside performance campaigns on Meta saw a 20% year-over-year return-on-advertising-spend (ROAS) boost compared to a 7% year-over-year decline for brands that only leveraged performance.
Reels is taking up a bigger slice of ad budgets, with advertisers connecting with the growing swathe of consumers whose primary media experiences – from news to entertainment – are through short-form video. Ad spend on Reels has increased dramatically 2.4x year-over-year. This rise is accompanied by improvements in engagement and a 23% year-over-year decrease in traffic costs. Brands with their head in the sand about its importance must adapt fast.
TikTok very much pioneered the growth of short-form video. While it was the new kid on the block in 2021, TikTok is becoming more effective than ever for driving sales. The conversion rate for conversion objective ads on TikTok has seen a significant 51% increase for two consecutive quarters. Despite the background chatter around a ban in the US, there is now a real, tangible blueprint for ecommerce success through leveraging the platform.
Meanwhile, within the Google ecosystem, YouTube offers a big opportunity at the top of the funnel. Clicks-per-minute (CPMs) are 20% lower than on Meta awareness ads, making it an effective channel as part of a video-first full-funnel strategy. Indeed, leveraging YouTube helps to mitigate the impact of rising search costs.
Start applying
Successful advertisers are not using these platforms in isolation, but instead realizing the benefit from cross-channel integration. This involves using insights and learnings from each of these channels to accelerate the performance of others.
So it is time for the industry to wake up from its inertia and adapt strategies to make sure their new lens is social-first, cross-channel, and full-funnel. But time is ticking for brands to get their strategies right for Q4. They need to decide on their experiments, plan them and schedule them over the summer to ensure they are in the best possible place for peak season.
To paraphrase a well-worn election phrase: if ecommerce brands want change, they will need to vote for it. Because inertia will guarantee failure.
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