CMO Briefing August 2014

CMO BRIEFING August 2014

five performance marketing trends for retail

AT PERFORMICS we’re squarely focused on uncovering the next digital performance opportunity for our retail clients - across search, display, social and affiliate. Here’s five trends - supported with data that are currently powering impressions, clicks and conversions for retailers:

1MOBILE FIRST Gone are the days when mobile was just an add-on. Going forward, all retail experiences must be planned and executed with a mobile-first mindset, as mobile will soon become the primary platform for digital media consumption (and already is for some demographics). comScore predicts that mobile use will overtake desktop in 2014. In terms of paid search, our aggregate client base is now dedicating 37% of total paid search spend to mobile devices (Q2 2014). We expect that mobile paid search clicks will eclipse desktop by the end of 2015. But currently, there’s a huge gap in mobile: in the U.S., people spend 20% of total media consumption time on mobile, but advertisers only spend 4% of budget on mobile (Mary Meeker, May 2014). As more retailers put mobile first, this gap is quickly closing.

US DIGITAL AD SPENDING GROWTH,

BY FORMAT AND PLATFORM, 2011 - 2016 % change 2011 2012 2013 2014 2015 2016 Social Media

235.2% 37.0% 35.0% 448.0% 170.0% 28.6% 23.3%

35.0% 85.6% 25.4%

32.0% 62.0% 23.5%

21.5% 57.4% 8.1%

14.6% -

29.0% 219.2% 22.3%

29.0% 93.7% 23.1%

29.7% 63.7% 24.8%

26.0% 80.1% 15.7%

17.1% 54.0% 6.2%

Display

20.7% -

18.2% 58.0% 11.5%

18.9% 54.0% 10.5%

20.7% 53.0% 10.0%

22.6% 53.0% 9.0%

16.0% 32.7% 5.2%

Paid Search

3.3% -

15.0% 200.7% 6.6%

14.0% 83.1% 5.2%

12.5% 59.1% 2.2%

11.5% 46.3% -0.5%

12.0% 39.6% -2.0%

Internet radio

4.3% -

11.0% 11.0% 10.0% 122.0% 122.0% 161.3% 8.7% 6.4% -3.2%

10.0% 33.2% 4.6%

10.0% 29.1% 4.3%

Classifieds

0.5% -

5.0% 93.7% 4.1%

4.0% 98.7% 2.2%

3.0% 86.1% -0.1%

2.0% 77.3% -3.3%

5.5% 84.4% -4.7%

Podcast

8.0% -

2.0% 0.0% 2.0%

0.0% 0.0% 0.0%

0.0% 0.0% 0.0%

0.0% 0.0% 0.0%

0.0% 0.0% 0.0%

- Mobile - Desktop

Video/ rich media - Mobile - Desktop

- Mobile - Desktop

- Mobile - Desktop

- Mobile - Desktop

- Mobile - Desktop

- Mobile - Desktop

Total

15.4% 18.2% 18.2% 18.6% 18.4% 14.8%

Note: all figures exclude agency commissions and production costs and reflect negotiated rates (after discounts); includes national and local media. Source: ZenithOptimedia, “Advertising Expenditure Forecasts,” June 2014; provided by Starcom MediaVest Group, June 1, 2014 www.eMarketer.com

gone are the days when mobile was just an add-on.

retailers can no longer optimize poor content to rank highly in organic results.

2 performance content Google updates its organic search algorithm 500 to 600 times per year. Most changes are minor, but recently, we’ve seen major updates like Panda and Penguin. Google rolled out Panda 4.0 in May 2014, which wreaked havoc on the organic listings for many retail brands (including eBay, which lost two-thirds of its organic real estate). Panda 4.0 focused on penalizing poor content while rewarding relevant, quality content. The Panda Era (i.e. the era of quality content in organic search) is certainly here to stay. Retailers can no longer optimize poor content to rank highly in organic results. Winning in the Panda Era requires a significant change in mindset. At Performics, SEO has given way to Performance Content - the art and science of creating engaging and useful experiences that, in turn, are awarded high organic rankings because they’re helpful to users.

3 performance social On the heels of Facebook Ad Exchange (FBX) success for retailers, the social networks have been developing more performance-based opportunities for direct-response. Social is no longer just a channel for branding; it can be used to drive measurable sales. Recent performance opportunities in social include Twitter click-to-call ads to foster local store traffic, Twitter and Facebook “Buy Now” buttons for real-time social ecommerce and Twitter objective-based campaigns (which enable retailers to align Twitter spend directly with a specific Twitter performance objective, like website clicks or conversions).

Additionally, Pinterest rolled out Promoted Pins in Q1 2014. Promoted Pins possess many of the characteristics of traditional performance marketing ads - akin to paid search or programmatic display. For instance, they can be bought on a CPC basis in real time, and targeted to ideal participants. They then mix in performance content elements like visual beauty.

It’s time for retailers to take a performance approach to social by leveraging these new opportunities. Like paid search, retailers can now set and manage to specific performance goals, including website conversions or in-store traffic.

4 real-time bidding, with a twist U.S. RTB (real-time bidding) is expected to grow from 34% of display ad spend in 2014 to 52% in 2017 ($9B) (MAGNA GLOBAL, Oct. 2013). RTB growth is powered by accountability.

However, instantaneous, programmatic auctions are complex, and advertisers are becoming concerned about transparency and inventory quality. Be sure to leverage RTB buying platforms that aren’t a black box. Going forward, display advertising success will depend not only on the speed of RTB, but also on the transparency and quality of ad inventory.

US DISPLAY AD SPENDING SHARE,

BY TYPE, 2011-2017 % of total

76%

62%

18%

47%

2011 RTB

21%

27%

17% 31%

25%

13% 11%

36%

29%

19%

28%

34%

2012

2013

2014

Non-RTB programmatic

32%

32%

47%

41%

2015

2016

52%

2017

Nonprogrammatic

Note: read as 28% of display-related spending was through RTB in 2013; numbers may not add up to 100% due to rounding. Source: MAGNA GLOBAL as cited in press release, Oct 14, 2013 www.eMarketer.com

5 deeper cross-channel/device integration We know that shoppers continually move across an endless spiral of channels and devices in the purchase path. For instance, of the 68% of people who researched products on their phones, 37% then purchased in-store (JiWire, Aug. 2013). Yet, many retailers still aren’t integrating online and offline experiences (IBM found that only 31% of companies integrate local search and offline, and only 38% integrate social and offline (Sept. 2013)). Furthermore, only 3% of companies’ online and offline analytics are “fully integrated” (CMO Council, Mar. 2013), and only 12% of companies are integrating CRM to create more personalized digital experiences (Econsultancy, Apr. 2013).

Retailers are increasingly leveraging data management platforms (DMPs) to integrate data sources, analyze large data volumes, and accelerate insights collection. This is fostering faster, more accurate, and more efficient targeting and measurement to boost performance across channels and devices.

shoppers continually move across an endless spiral of channels and devices in the purchase path.

to help position your brand to capitalize on these retail trends and pounce on performance contact performics t o d ay.

Lindsay Landsberg SVP, Business Development Lindsay.Landsberg@performics.com +1 312 739 0670 www.performics.com