Advertisement

How the Explosive Growth of Shoppable Ads will Impact Pricing and Spending

Social shopping is becoming more and more popular given the surge in social media usage and the ease of completing a transaction without ever leaving the app. It’s no surprise that social commerce sales are expected to reach $45.74 billion in 2022. With this growth, shoppable ads have been gaining traction over the last several months. For instance, ahead of the holiday season, TikTok announced a rollout of several new shoppable ad formats, including video shopping ads, catalog listing ads and live shopping ads.

How will shoppable ads impact ad spending and CPM pricing as we head into 2023? What should advertisers be aware of when investing in this format?

Let’s first look at what’s happening in the digital retail space to better understand how brands might use shoppable ads this year.

The Transformation of Search

Consumers are searching a lot. But they’re beginning and ending their searches in different ways and places.

Advertisement

Traditional search is declining. In January 2022, search grew by 24% YoY while the rest of digital grew 34% YoY. Come Q3, each month was increasingly negative for paid search spending by the biggest advertisers through the biggest agencies. Instead, we’re seeing the rise of retail search — meaning more consumers are either ending or doing their entire search process on Amazon and other retail sites instead of going to search engines. As of September 2022, search platform growth was down 12% while retailer platforms were up 13%. 

This makes sense as more brands now have highly mature digital distribution, either directly via DTC or indirectly via retailers, which are also now buying keywords on traditional search platforms to drive site traffic. This enables consumers to pick up search behavior on these sites through native search and listings within retailers’ standardized directories, completing consumer search intent. These shifts mean shoppable ads are perfectly positioned to meet the moment for both consumers and advertisers.

How this is Impacting Ad Spending and Pricing

Retail media is taking dollars away from search and driving up overall ad spending and pricing.

More brands are activating their first-party data beyond their owned and operated ad inventory on channels like connected TV, programmatic video and display, social, email and even direct mail, using in-store shopper and/or ecommerce transactional point-of-purchase data. It’s this first-party-based approach in which advertising metrics can be tied to actual sales — thereby improving efficiency — that makes retail media so appealing in the face of macroeconomic and industry factors like third-party cookie deprecation, rising customer acquisition costs and measurement and reach challenges.

Zooming in on social media as a channel for retail media activation, transitioning from simply advertising on these apps to powering real commerce activities helps forge a direct path to purchase, build brand awareness and grow customer loyalty. Features such as live shopping, new in-app ad formats such as social video, which has the lowest CPM among video platforms at $6.22, and Meta’s reels, which have hit a $3 billion annual revenue run rate, help brands connect ad spend to purchases. A shift to social simply makes sense, especially for retail advertisers that are looking to drive lower-funnel goals.

What we Might Expect in the Future on These Platforms

Social itself is in the middle of a shakeup. Based on November 2022 data, Twitter is No. 4 among social media platforms, capturing only 7% of social media budgets behind Meta, Snap, and Bytedance. This is a dramatic change from pre-pandemic Q3 2019, when Facebook accounted for almost three-quarters of the share of social media budgets, followed by Twitter in second place with a 12.2% share.

With Twitter fading from advertisers’ plans due to brand safety concerns and the economy, we’re likely to see these budgets shift to other social channels that fulfill lower-funnel goals. And with 70% of Generation Z and 59% of millennials watching stories on Instagram, it seems likely brands will continue to lean into shoppable ads in 2023.

The key to getting these ads right with your target audience is by being genuine and transparent — 45% of Gen Zers say that a brand “appearing trustworthy and transparent” is a big motivating factor for engagement. Ad content and creative should align with your brand, and any social good or sustainability values you possess should be incorporated, as younger consumers are more loyal to brands that make efforts in these areas.

The advertising landscape will remain dynamic throughout 2023 in the face of various macroeconomic factors. If we follow the data, investing in shoppable ads seems like a safe bet.


Darrick Li is VP, Business Development & Strategic Partnerships, North America at Standard Media Index. He brings over 14 years of measurement, media and advertising experience. Prior to SMI, Li held a senior role at Comscore, Inc., working with the leading agencies, publishers and marketers across digital media. His unwavering work ethic and ambition to become a great storyteller led him to be a part of the Marketing faculty at Seneca College in Toronto, teaching with the Social Media graduate certificate program. His passion for food has driven him to be a Board Director at North York Harvest Food Bank, contributing to the challenges of food insecurity. In his current role at SMI, he oversees the Canadian operation across partnerships, product, business development and client service, and is actively involved in global business development and strategic partnerships alongside the SMI leadership team. Li is actively involved with industry associations, committees, initiatives, and speaking engagements in some of the largest conferences across Canada.

Feature Your Byline

Submit an Executive ViewPoints.

Advertisement

Access The Media Kit

Interests:

Access Our Editorial Calendar




If you are downloading this on behalf of a client, please provide the company name and website information below: