ad tech

Shopify Audiences Expands Ad Targeting Capabilities with New Integrations

Shopify Audiences, Shopify’s ad tech integration offering revealed a new ad targeting capability. Additionally, it increased the number of its partners. Initially, Shopify Audiences debuted with just Google and Meta. Later on, Pinterest was included in the mix. Recently, Shopify Audiences announced new connections with three significant ad platforms, Snap, TikTok, and Criteo. The collaborations increase the effectiveness and reach of Shopify Plus merchants, enabling them to more precisely target customers. The platforms will be able to connect to Shopify utilizing their preferred ad network for modeling data.

Shopify audiences

Shopify Audiences was introduced last year with the goal of streamlining client acquisition and assisting retailers in raising their return on ad spend (ROAS). It now offers greater analytics and links to new ad channel partners, including Snap, Criteo, and TikTok, thanks to an updated version. It also has the best algorithms yet, which can cut customer acquisition costs by as much as 50%. The strong ad platform alliances enable Shopify Plus retailers to contact their target clients more extensively and affordably.

Benchmarking functionality for optimized ad performance measurement

With the help of Shopify Audiences’ benchmarking feature, retailers can assess how well their advertising campaigns are performing against those of other companies in a similar industry. The function also offers additional insights and makes it easier to make data-driven decisions. It enables businesses to improve the effectiveness of their advertising. The updated features add to a tool that is always being improved to increase consumer acquisition and return on advertising spend. For instance,

T-shirts created to order are available from a vendor. Despite the fact that they sell clothing, they are not high-end outfit designers. With Shopify Audiences’ new benchmarking feature, they can assess the success of their campaigns against those of other, comparable businesses, not only clothing stores. With a more apples-to-apples comparison, this offers more insightful information.

Read More: Roku-Shopify Revolutionize TV Ads By Enabling On-Screen Purchases

The Shopportunity

Shopify Audiences does not collect or offer user-level data. It can create unique audiences who could be interested in a certain product. This is thanks to Shopify’s data modeling hub, which is based on Shopify’s analysis of its merchant base. In comparison to other payment-based advertising products, Shopify Audiences offers less privacy exposure. Shopify is now at ease adding third-party programmatic thanks to Criteo.

The algorithm becomes more effective as more companies use Shopify Audiences and sign up for the platform, using particular insights from customers across participating shops. This in turn boosts output, creating a positive feedback loop. The success of Shopify Audiences is heavily dependent on this loop. Additionally, it’s stated that Shopify Audiences is a major factor in why merchants decide to upgrade to Plus, with many implementing it an average of one week after their upgrade.

Shopify Purpose

The Shopify Plus package, a more expensive membership level for their e-commerce platform, includes Shopify Audiences. Shopify doesn’t receive any CPM revenue. Furthermore, unlike retail media networks, it doesn’t receive a cut of revenues or a high CPM associated with such purchases. This implies that Audiences aren’t always a significant revenue generator. Instead, as it includes new merchants in the Plus category, it gains value. Increased sales from all merchants benefit Shopify, which receives a fee for processing payments. Shopify could easily enter the media category and tie its data to CPM if it wanted to increase its audience revenue. It is the only platform that Meta would consider using to replicate its sales attribution network for e-commerce sellers.

Read More: Criteo’s Commerce Max DSP Unites Retail Media with General Availability

Shopify Momentum

The products from Shopify work together to develop better services for retailers and give them a unified offering. Shopify Plus retailers can use their Shopify Credit cards to pay for their advertising costs while receiving cash back. The audience is a special advantage that only Shopify offers. It uses the combined strength of Shopify merchants to make it easier for them to efficiently attract new clients. Shopify makes investments in this area to help companies reach clients worldwide. Retailers could be reluctant to provide information that will be gathered and then used by other merchants, including potential rivals. They may view their involvement with Shopify Audiences as a means to connect with fresh potential clients.

Here’s what they said

Shopify’s VP of Advertising, David Wurtz said, 

Shopify is at the forefront of commerce. Wherever there’s an opportunity to connect merchants and buyers, Shopify is there first. Since launching Shopify Audiences last year, our algorithms have only gotten smarter and more effective thanks to the collective power of our merchants. We’ve long said that commerce is not a zero-sum game. Together, the independent merchants on Shopify help each other win. A lot of the inventory on the open web is underappreciated and underpriced. With the addition of Criteo, Shopify can drive “a lot of volume” of ads to the web and improve customer acquisition costs for its merchants, just like the big social platforms have for particular brands or categories.

Rory Mitchell, Criteo’s GM of global growth added, 

Aside from access to Shopify custom audiences, Criteo “can then show the power of our platform, which allows a Shopify merchant to think about things like onboarding their first-party data to our platform for retention or retargeting campaigns. It’s a “natural progression,” he added, from the modeled approach to Criteo’s shopper graph products, which do use onboarded first-party data. And we know how to get performance for these customers in a way that is really scalable across the open internet.

Ali Rana, Global Head of Revenue Partnerships for Snap commented, 

We’re thrilled to team up with a commerce leader like Shopify to enable merchants to reach more high-intent shoppers on Snap. 

Read More: New ‘Instacart for Shopify App’ Revolutionizes Merchant Advertising

Morgan Stanley Forecasts Australian Ad Spend To Fall By 9% In 5 Years

In a recent analysis by investment bank Morgan Stanley on Australian advertising, it forecasted that the domestic media share will shrink if it doesn’t innovate quickly. The domestic media ad spend was $10.4 billion in 2019 and will fall at an annual rate of 9% over the next five years. In a note to clients, analysts wrote,

“We think investors perpetually underestimate the global leakage of ad spend from Australia.”

A section of marketers holds a viewpoint that the ad spend with Google and Facebook has started to plateau and revenue is returning to the domestic traditional media. However, the analysts completely disagree with this market viewpoint and highlighted numbers that suggest that there can be an acceleration post-COVID 19.

The Australian advertising market has shown little growth over the years – around 1.9 % a year. Also, the financial statements filed with corporate regulator ASIC reveals that over the last three years, global media/tech players’ revenues in Australia increased by roughly 20%.

The global ad tech players like Google, Facebook, Snap, and Twitter as well as emerging players like TikTok continue to take an increase in share in the Australian consumer’s time especially the younger demographics. They will have a larger share in digital media spend in Australia post-pandemic as well.

Image Credit: Ad news

Morgan Stanley forecasts 2.1 % revenue to fall of global tech players in Australia in the current downturn but not as severe as that of domestic media- radio, outdoor, print, and TV. On the other side, the revenue of the domestic media players will see a drop of steep 22.1%

However, the analysts believe that global players will lift their market share in advertising in Australia. For instance, Google Australia’s gross revenue was $4.8 billion in 2019.  Morgan Stanley estimates a 4% decline this year owing to the ad industry slow down but expects to rise 13% year-on-year growth up to 4 years to reach between $7 billion and $8 billion in ad revenue a year in 2024.

Analysts say,

“Eventually, COVID-19 will be over and there will be a cyclical recovery in the Australian economy, and a bounce-back in the advertising cycle. ”

He further added that the market will be disappointed in expecting a rise in domestic media earnings.

“Even post COVID-19, when the overall advertising market stabilizes and starts to improve, we think the magnitude of the recovery will disappoint investors.”

“Our point of difference is our thesis … that if the global tech players continue to grow revenue double digits in Australia, but the total pool of ad revenues is only increasing 2% to 3% p.a., there is necessarily a ‘crowding out’ of ad spend left for domestic media companies to pursue.”

The markets underestimate the risks to ad revenue, profit margins, and ROCE(Return on equity) from a 5-year long term view. The main reason for the global tech giants growing faster than local media is structural changes. ‘Necessity is the mother of invention’ and businesses that continue with traditional media platforms for advertising need to change and rethink their strategy.

The analysts in the report mentioned that

“The consistent industry feedback we receive is the current challenges facing large, small and medium-sized businesses across Australia is prompting leadership and management teams to think harder and deeper about becoming more digital,”

Many SMEs have tried marketing on digital platforms for the first time during COVID 19 as consumer behavior and time spent has changed and accelerated towards digital/online/mobile media. It is expected that the same pivot will exist with the advertising budgets.
Unfortunately, the crowding of traditional media- radio, outdoor, TV, print – is set to be more intense.

Image Credit: Adnews

Morgan Stanley continues to have an underweight rating for ASX media companies like Seven West Media, WPP AUNZ, oOh! media and Southern Cross but Nine Entertainment.

Nine Entertainment (NEC)is an exception due to its various revenue sources like digital subscription, streaming, and digital advertising assets. Analysts believe that some Australian media companies have the potential to reinvent themselves and develop digital businesses and NEC has demonstrated the ability for such a reinvention.

The global players may face a threat if they fail to innovate themselves and will lose their consumer share and ad share.

Advertisers Look For Greater Transparency In Programmatic Ad Buying

Time and again, “Transparency’ has been a cause of concern for advertisers in the programmatic ad buying. This has been a long time pending issue which still remains unresolved as advertisers try to uncover what happens to money spent on programmatic ads.

Ad spend is falling and advertisers are again seeking greater transparency into the ad-buying supply chain. Hidden fees, fraud, viewability, and brand safety are the growing concerns that need immediate attention.

Trade body ISBA studies reveal that nearly half (49%) of ad buys disappear before reaching publishers and 34% of this money is the disclosed fees agencies and ad tech vendors take for trading impressions. However, 15% cannot be attributed to what the report called an ‘unknown delta’ on the supply chain. The amount of money that reaches publishers is lower, as the report did not consider ad fraud and ad viewability.

As reported earlier, a noticeable amount of programmatic dollars doesn’t reach the publishers and it is getting increasingly harder to keep a track of where it goes.  The trade body struggled for nine months to gather data from the ad tech vendors to make a report on this and when it received data is was unusable.

PwC collected information for the study was data on 267 million impressions traded between 15 advertisers, eight agencies, five demand-side platforms, six supply-side platforms, and 12 publishers from the Association of Online Publishers from Jan. 1 to 20. March. Of those impressions, only 31 million (12%) were actually analyzed by matching log-level and aggregated data across 290 different supply chains.

PwC reported that it was highly cumbersome and hard to collect data on each impression. Ad tech vendors were conservative in sharing data due non-disclosure agreements and data collected was in different formats making it difficult to trace an advertiser’s money to so many different publishers. The advertisers involved in the study were non-premium 40,525 sites on an average.

Generally, an advertiser or agency decides to buy impressions and pay for them on DSP  while publishers use SSP to sell their inventory at advertisers. Data on impressions from these two platforms are matched up and PwC did the same. However, data could not give financial transparency for the advertisers and publishers There were still costs in the ‘unknown delta’ that remains unidentified on the report. For instance, hidden fees can be a combination of additional ad tech vendor fees, post-auction bid shading, trading deals, and other unknown factors.

As quoted Sam Tomlinson, marketing assurance partner at PwC in DigiDay,

“This is more because the programmatic ecosystem is built on legacy processes that are a mess.”

Graeme Adams, head of media at BT Group  said,

“We desperately need to see a common set of standards adopted and more openness in this market, so that every penny spent is accounted for. If this happens, we’ll invest more in the channel; if not, we will cut back and reshape our trading approaches.”

To conduct such high and intense study is a big expense. For instance, It costs more than £1 million ($1.2 million) to collect and process the data from different sources in ISBA’s study. A lot of emphasis is given to attain log file data by marketers. If the ISBA report proves anything that the log file data can reveal everything about transparency and nothing at the same time.

Ruben Schreurs, managing partner at digital media consulting firm Digital Decisions responds to log file data and said,

“Using the overly sophisticated approach of trying to match log-file data in real-time is like buying the IBM Watson supercomputer to calculate 1+1.”

He added that advertisers should have a sensible and valuable approach by running a periodic review of their net spend on publishers and match it with publisher data cumulatively. This will help to get the right and required output to make value-driven decisions on how to optimize the value chain and avoid complicating technologies.

Nevertheless, the report findings can help the adtech industry and give the insight to enhance financial and data transparency as regulators on impressions as regulators dominate.

Steve Chester, director of media and advertising at ISBA said,

“If the ad industry can be seen to be demonstrating that we can create a more open and transparent market then it could avoid the necessity of being regulated.”

Shopify Revenue Surges As Pandemic Brings More Business Online

E-commerce platform and payment provider Shopify reported its first-quarter revenue that surpassed analysts’ estimates as more businesses moved online to survive coronavirus pandemic.

The Ottawa-based company Shopify said in a statement that sales grew by 47% to $470 million from the same quarter a year ago. However, analysts expected revenues to come to around $443 million

The key metric of gross merchandise volume which represents all goods sold on the platform 46% to 17.42 billion compared to the previous year. Again, beating analysts expected volume to $16.68 billion.

While sales were booming, the company still posted a net loss of $31.4 million or 27 cents a share. However, on an adjusted basis, the company posted a profit of $22.3 million or 19 cents per share for the first quarter of 2020 compared with an adjusted profit of $7.1 million or six cents per share for the same period last year.

CEO Tobi Lutke said in the quarterly release,

We are working as fast as we can to support our merchants by re-tooling our products to help them adapt to this new reality. Our goal is that, because Shopify exists, more entrepreneurs and small businesses will get through this.

Moving Online

Shopify reported a fall of 71% in gross merchandise volume through its store point-of-sale as stores shut down due to pandemic between March 31 and April 24. Companies also downgraded from Shopify Plus to lower-priced plans.

Also, it throws light on the drop in point-of-sale purchases from the brick and mortar stores questions the sustainability of online switch. It provides store based point-of-sale systems to merchants to operate from a single platform in order to maintain online store and sales.

It is closely observing consumer spending habits online and the ability of brick-and-mortar retail merchants to shift sales online. According to the company statement, Shopify retailers managed to replace 94% of their store volume with online sales.

Retail merchants are adapting quickly to social-distance selling, as 26% of our brick-and-mortar merchants in our English-speaking geographies are now using some form of local in-store/curbside pickup and delivery solution, compared to 2% at the end of February.

Chief technology officer Jean-Michel Lemieux noted the surging demand and had U.S. Black Friday-type of traffic as businesses have used Shopify to stay afloat as nationwide lockdown forces retail store closure across the world.

Impact of COVID-19

This pandemic has strained small and medium-sized businesses and accelerated the shift of buying habits to eCommerce. Shopify introduced many initiatives to support merchants and help entrepreneurs start a business online during the ongoing COVID-19 pandemic, including, offering tools to businesses to open their own digital store online across channels including social media.

An extended 90 day free trial for new sign-ups, gift card capabilities to merchants, and introduction to in-store or curbside pickup and delivery options for greater flexibility in the movement of inventory between different locations.

The company stated that the new stores created on the platform grew 62% between March 13 and April 24 versus the prior six weeks, driven by both first times and established sellers. But is also added,

It is unclear how many in this cohort will sustainably generate sales, which is the primary determinant of merchant longevity on our platform.

What analysts  have to say

Few analysts still don’t see Shopify profitable enough in the future to justify the current stock price. They believe the rally is overdone.

Barry Schwartz, chief investment officer at Baskin Wealth in Toronto notes that as they grow, the company will face fierce competition from rival Amazon. He added,

They’re up against some very heavy hitters and I don’t think those guys are going to let Shopify win everything.

Buying it here at that valuation, you’re essentially saying, ‘I don’t care.’

Canaccord Genuity downgraded the stock, with a warning “we’re not entirely convinced” that gross merchandise volume “is as bulletproof as perceived.”

Verizon Media Expands DSP to Offer Premium Native Ad Inventory.

Verizon Media has announced the expansion of its demand-side platform bringing in premium, programmatic, and now its full native marketplace inventory, formats, targeting, and measurement into a single unit. 

The DSP gives a unified solution to the advertisers to check on every aspect of their buys across all formats and inventory purchases- from planning, buying, and management to optimization.

Today, people are using more screens and devices than before. Therefore, it becomes challenging for advertisers to provide a personalized and unified experience across the media mix. This level of fragmentation eventually leads to using different tools for different formats and then measuring the success of each of them would be laborious. But now advertisers can have access to omnichannel inventories including mobile, digital out-of-home, CTV, video, and audio along with native advertising from a single dashboard.

According to Iván Markman, the chief business officer at Verizon Media,

The Verizon Media native [ad] experience was separate from the programmatic capabilities in our DSP…Now both are one, and this includes a lot more consistency [campaign] planning and measurement and attribution. Over the last few quarters, we’ve looked at bringing more transparency and insights to our DSP.

The expansion of DSP’s functionality provides exclusive access to native ad inventory from Verizon’s owned and operated properties like Tech Crunch, Yahoo, and Huffington Post. The robust native marketplace format and premium inventory along with the programmatic offering, supported by 1st party data will help advertisers navigate a cookie-less environment.

In an era when media agencies are on hiring freeze if not headcount cutbacks, it was essential for the company to improve the efficiency of the tools. Markman stated, “You can now do more with less.“He further added,

Sometimes you’d have seven different platforms for things like digital out of home and native then display. Many of our clients have unfortunately had to furlough some team members or lay off their workforces. This helps with performance.

Facebook Post Strong Earnings in Q1’20, Exceeds Analysts Projections

Its earnings season and Facebook has some relatively good news on that for the investors. It has impressively beaten Wall Street expectations on revenue and earning per share (EPS). Facebook ad revenue grew by 17% Y-o-Y despite the instability in the digital ad market due to COVID-19.

Image Credit: Facebook

Why does it matter?

Interestingly, Facebook was able to beat top and bottom-line revenue expectations amid the coronavirus crisis showing how its business is strong and growing. However, the company didn’t provide specific revenue guidance for Q2 due to the ongoing uncertainty but offered a snapshot on the revenues of upcoming quarters.

• Meanwhile, Facebook said that the current rise in engagement will continue but the usage will come down once the stay-at-home orders are lifted. 
• The digital advertising industry has taken a hard hit due to shelter-at-home orders globally. Facebook said in a  statement, “We experienced a significant reduction in the demand for advertising, as well as a related decline in the pricing of our ads, over the last three weeks of the first quarter of 2020.”

Let’s talk numbers

• Earning per share (EPS): $1.71 vs. $1.75 per share forecast by Refinitiv
• Revenue: $17.74 billion vs. $17.41 billion forecast by Refinitiv
• Daily active users (DAUs): 1.73 billion

Image Credit: Facebook

• Monthly active users (MAUs): 2.6 billion
• Family Monthly Active people (MAP): 2.99 billion monthly users across its family of apps. This metric helps to measure Facebook’s total user base across its main app, Instagram, Messenger, and WhatsApp.
• The average revenue per user (ARPU): $6.95
• Other revenue: $297 million which is driven by sales of VR headset ‘Oculus.’
• Cash and cash equivalents: $60.29 billion

What lies ahead?

• Facebook is the third internet company that posted strong Q1 results after Snapchat and Google despite the hindrances in the digital ad market. This shows big internet companies will keep dominating the advertising ecosystem due to the pandemic.  
• CCS Insight chief operating officer Martin Garner believes the impact of the virus will lead companies to use digital services from advertising to collaboration. 

“………..Although Google and Facebook will take a hit from Covid-19, we expect them to be leading indicators of recovery, as digital advertising and other services show early growth in economies getting back to normal.”