The Readout July 2022: The ecommerce landscape is at a turning point
Change is in the air. And with all change comes challenges and opportunities.
The beginning of the year was defined by increasing competition on Meta platforms and a corresponding surge in traffic costs – and this trend continued into the start of Q2. Yet as the quarter draws to a close, the picture looks markedly different. So, what happened?
This is largely driven by the wider economic slowdown. The first brands to feel the impact were VC-backed D2Cs, where cash quickly dried up as pressure from investors shifted from growth to profitability. The initial effect of this has been cheaper traffic as some brands pulled back from the auction, and by June, competition started to decline.
There remain issues with signal noise on Meta platforms due to industry privacy initiatives – but there are now clearer strategies for success. Advertisers should prioritise incrementality over in-platform results to drive performance. Understanding where new customers are coming from is essential in the current landscape.
Looking forward, many consumers will hold out for promotions for their Christmas shopping this year. Brands will be forced to discount and will potentially move earlier to beat competition. An additional curveball is that Black Friday coincides with the World Cup in Qatar this November, bringing more advertisers than ever to the auction.
There will be pressures on brands to cut marketing spend throughout 2022 – but in the current environment, it is more important to be as efficient as possible, and that means having the right strategy in place. The lower platform costs right now offer an opportunity for brands to ensure their creative is delivering and to test concepts over the summer before costs rise again.
Those who pull back too much now will be paying for it come Q4.
In The Readout – our new quarterly review of the paid social landscape for ecommerce brands, we outline the key trends that advertisers encountered in Q2 and explore opportunities for brands as the landscape shifts:
Trend toward short-form video continues
The adoption of short-form video has grown significantly over the past year – as TikTok grew to new heights and Meta developed its own contender Reels.
Correspondingly, Stories spend has increased 182% YoY whilst CPM has increased by 102%, and there is a shift towards Reels as a result.
Success on short-form video and UGC content will be key to achieving performance on paid social as this trend accelerates.
Broad audiences are more efficient in 2022
Targeting has become more challenging since privacy initiatives such as iOS 14. One impact of this is that broad audiences now drive lower-cost traffic than interest or lookalike, with 29% lower CPC than interest and 48% lower than lookalike.
Audience Liquidity clearly works well in 2022 – and brands no longer have to focus as much on audience segmentation.
It is important to note that ad creative is especially important when advertising to broad audiences.
Static ads deliver consistent engagement
Creative remains the most significant optimisation lever for performance on paid social.
In Q2, static ads delivered a 34% higher CTR and 39% higher CVR than video ads, highlighting the efficiency of static creative to drive performance despite current trends toward short-form video.
Whether you are using static, video or DPA and DABA, there is a real benefit to using all the different tools in the creative arsenal.
Explore the latest paid social trends, learnings and opportunities for ecommerce brands in the full report: