The Readout July 2024: Resurgence of retailer confidence
Online retail conditions are more favourable. Ecommerce marketing has changed. The brands seeing growth are the ones that adapted.
’24
Online retail conditions are far more favourable than this time last year.
However, ecommerce marketing has changed, with the majority of the recovery benefitting brands that have adapted. Take a deep dive into the latest trends and opportunities for ecoms in the July edition of the Readout.
The online retail landscape this summer contains both opportunity and inertia. There is a mood of change in the UK. The incumbent Labour government promises to take the country in a new direction, while consumer confidence, economic growth and inflation are all moving in positive directions.
Performance works very differently now compared with in 2021. Much of the industry has faced years of stagnant performance with agencies or in-house teams that haven’t moved with the times.
Brands looking to scale within this more favourable landscape will find that performance works very differently now. Fear of economic challenges and budget costs have made the problem even worse. So, what does work in 2024? Ecommerce advertising today is full-funnel and social-first, with continuously rotating creative. It necessitates a cross-channel approach that covers all bases to enable max efficiency and scale.
And our clients are seeing growth from this strategy: average Meta spend is up by 57% whilst average Google spend is up by 70%. Retailer confidence needs to catch up with consumer confidence — and that will only happen when brands stop blaming poor growth on the economy.
Thirteen findings on the new shape of ecommerce performance.
Ecommerce growth is social-first in 2024
What is the optimal channel mix for performance? Over the past 15 months, we have been shifting spend allocation for a group of previously Google-first clients.
We were able to increase Meta spend by 60% YoY for the group with stable efficiency whilst maintaining Google spend at similar levels to capture demand.
Leveraging paid social for prospecting, and finding incremental audiences, are central to delivering a full-funnel strategy.
Why is cross-channel integration important?
Running multiple paid media channels together enables a cohesive strategy, where insights and learnings from one channel can accelerate the performance of others.
Before thinking of a channel mix, it’s important to define your funnel mix. Your objectives and strategy come first, followed by the channels to deliver it. In practice, that means systematically considering the right channel selection, budget split, and metrics to deliver for each funnel stage.
Despite varying perspectives on how to manage different channels, it’s crucial that each channel aligns with the same overarching narrative.
It is also key to ensure that your creative strategy is aligned across channels with different creative needs. A key benefit of managing multiple paid media channels together is the opportunity to share insights from one channel to another. Creative trends on Meta or TikTok can offer insight that may help plan PMax and YouTube creative recommendations, potentially providing edge.
Competition increases as CPM finally rises
The trend of big CPM discounts on Meta has come to an end, with competition having increased over the spring as brands returned to the auction. This is a signal that advertiser confidence is starting to improve.
eMarketer recently reported that the UK ad market is showing signs of a modest rebound. Slashing budgets out of fear of a wider economic decline was always a short-termist strategy — but as the tide shifts and advertising gets more competitive, your brand should be planning for growth.
Meta is driving 57% more growth for brands
Meta is proving highly scalable in 2024: average Meta spend is up by 57% YoY in Q2 2024, and is even up 5% from Q4 2023.
Despite significantly higher spend per account, our average conversion rate is flat YoY and AOV is up by 6% YoY, proving that Meta is a highly scalable channel in 2024. This is also evidence that strategies are shifting to growth.
Much of this increase is driven by US scaling strategies, and we are seeing a 244% increase in spend in the US market.
Reels takes up a bigger slice of budgets
Reels is here to stay. Media spend on the format has increased by 35% QoQ and by 2.4 times YoY, while the total percentage of Meta budgets invested in Reels has increased from 5% in Q2 2023 to 10% in Q2 2024.
Brands that have their head in the sand need to adapt. Engagement is improving, and traffic costs have reduced by 23% YoY.
Unsure of how to crack Reels? Check out our on-demand webinar →
Reel results guaranteed
Reels operates very differently to other formats. To ensure results for our clients, we have carried out many tests on how to deploy short-form video effectively.
We saw a significant improvement in ad performance when running conversion-objective Reels. In one test, conversion objectives saw a 150% higher CVR resulting in higher ROAS than our BAU conversion activity.
The results of aggregated tests show that using standalone Reels delivers 186% higher CVR and 44% lower CPA versus Reels via auto-allocation.
Most new spend is going to broad audiences
The majority of the increase in spend across our portfolio has gone to broad audiences, which have seen a 157% YoY increase. Increased adoption of Advantage+ Shopping Campaigns is behind much of this increase.
We are seeing a corresponding increase in CPM, which is up by 41% YoY for broad audiences. Despite the higher CPM, performance on broad audiences is strong, and it has notably higher CTR, AOV and ROAS when compared to lookalike and interest.
Bid multipliers help to steer Meta’s AI
We have seen generally strong results in testing bid multipliers for ASC. One brand was able to decrease CPA by 47% and increase CVR by 117% period-over-period by applying a bid multiplier to prioritise more lucrative markets.
Using these multipliers can be a powerful way to leverage ASC’s AI whilst controlling it and aligning it with business goals. Despite this, ensuring you have the right multiplier is important before scaling, as not all drive improved results.
Strategies continue to shift up the funnel
The increase in spend on upper-funnel objectives shows no sign of slowing down, with awareness activity up by 4.2x YoY and 109% QoQ.
As more brands struggle with increasing acquisition costs and declining brand search, marketing teams are under pressure to turn things around.
Adapting to a full-funnel strategy targeting incremental audiences for your brand requires a change in both mindset and measurement, but it is proven to drive higher, and healthier, growth.
Measuring brand’s effectiveness
Deploying brand campaigns as part of a full-funnel strategy means measuring its impact against performance objectives.
When testing the launch of brand for one retailer, we saw a 21% YoY decrease in CPMs compared to BAU structure, whilst the ROAS from retargeting campaigns increased by 89% PoP, significantly improving the efficiency of their campaigns.
Meanwhile, another brand was able to dramatically increase reach by leveraging TOF campaigns whilst maintaining ROAS.
Prepare for US ad costs to increase
UK retailers have set their eyes on the American market for growth. The same is true for our portfolio, where we have seen a 244% increase in ad spend in the US market.
CPMs are higher in the US market — in Q2 2024 they were 2.25x the cost of UK CPMs. However, American consumers also spend more, with 1.49x the average basket size, and higher LTV. US spend was up 244% YoY, while conversion rates increased by 62% YoY.
You will not get a better moment than now to invest in the US. In the last election, US ad costs soared by 38% QoQ in Q4 2020. Swing states are likely to see particularly high CPMs — if you’re targeting Nevada, Arizona, Georgia or Pennsylvania, plan accordingly. The election outcome itself could impact consumer confidence; Democrat-leaning states could see retail malaise if Trump wins.
This includes common target markets for UK brands on the East and West coasts. We suggest deploying a strong top-of-funnel strategy to mitigate the risk there.
Creative testing pays off
Having the right testing framework for your creative is important now as we lead up to Q4. We outline three tests as examples.
In one creative test, we compared the results for sales messaging versus covering taxes and duties costs, to see which discount resonated the most. The sales message delivered more purchases and lower CPA. In another, we tested two different social proof concepts, which delivered CVRs at 58% and 86% against the account average.
Finally, we tested Nest Studio creative vs client-produced creative, with our creative delivering 32% higher ROAS.
Creative is your quickest lever to turn around Q4
Understanding in advance how, and where, you can use creative as an edge over competitors should be a key pillar of your wider marketing plan for peak.
If you’re smart enough to be planning ahead, your strategy should involve the following: finding out what resonates with your audience, building appetite with TOF creative, and ensuring you have a diverse set of creative.
If you find yourself in September without the right creative strategy in place, there’s still time to introduce tactical ideas that are likely to bolster your performance. Firstly, outline a testing roadmap alongside a plan for how you’re going to leverage ASC during the period. Next — design availability is always under pressure during peak. Lock in resources in advance, agree peak-specific concepts, and brief them in early.
Finally, you’ve still got time to commission paid social-specific creator content for BOF.
TikTok is on a bull run: conversions up by 51%
TikTok is proving to be an effective platform for BOF performance. Conversion-objective ads have seen two consecutive quarters of more than 50% QoQ growth on aggregate across our clients, and are up 182% between Q3 2023 and Q2 2024.
Successful deployment of summer sales is driving a good proportion of this increase, but that doesn’t tell the entire story.
This growth has been steady across our portfolio, suggesting there is a big opportunity during BFCM sales on the platform.
Results from PMax remain strong since Q4
PMax ROAS remains high since it peaked in Q4 2023, up by 72% YoY. Google has been investing in its AI solution and it is showing in the results.
Getting the most out of PMax requires quality inputs for structure, creative, audience, budget and feed.
There remains a question mark around the incrementality of PMax. Excluding brand helps. However, the best mitigation here is to use it as part of a wider channel mix.
Search is getting more expensive
Marketing teams are under pressure to deliver quick results from their investments. This has led to a big increase in competition on lower funnel channels like Search.
The result of this is a spike in CPC for Search, which is up by 49% YoY.
Investing in brand building is key to overcoming higher traffic costs on Search. A cross-channel, full-funnel strategy will increase brand search and reduce acquisition costs at the BOF.
YouTube offers cheaper CPMs than Meta
YouTube offers a big opportunity at the top of the funnel. Almost half of YouTube viewership happens on TV screens.
YouTube has very particular creative needs compared to video ads for Meta or TikTok. You should ensure your creative has the right hook, introduces your brand clearly, builds an emotional connection with your audience, and has a clear directed action.
Fortunately, CPMs are also 20% lower than Meta awareness ads, making it an effective channel for your full-funnel strategy.
What’s happening on Meta?
CPM has increased by 6% YoY. The majority stems from higher adoption of broad audiences, which have seen the highest CPM this quarter. The US is an interesting outlier, with a 23% YoY decrease.
Engagement is down 2% QoQ and 9% YoY. Combined with a modest CPM rise, traffic costs are up 17% YoY. Most of the CTR fall is due to increased adoption of video ads.
Conversions have decreased 4% QoQ and are flat YoY, with slight declines in UK and ROW. The US is an exception, where conversion rates increased significantly by 62% YoY.
- CPM
- -1%YoY
- -3%QoQ
- CTR
- -7%YoY
- -10%QoQ
- CVR
- -1%YoY
- +2%QoQ
- CPM
- -23%YoY
- -20%QoQ
- CTR
- -34%YoY
- -32%QoQ
- CVR
- +62%YoY
- -3%QoQ
- CPM
- +2%YoY
- +29%QoQ
- CTR
- -14%YoY
- +30%QoQ
- CVR
- -3%YoY
- -15%QoQ
What’s happening on Google?
CTR is down 1% YoY, mostly due to increased investment in YouTube and long-term brand objectives. The UK has the biggest decline, down 18% YoY.
Conversion rates are moving in a positive direction, up 9% YoY (and 14% MoM through the report). Increase isn’t driven by one channel — both PMax and Search up.
Despite an 18% increase QoQ, CPC is 11% lower YoY. Two channel trends competing: 29% decrease in CPC for PMax counterbalancing a 49% YoY rise for Search.
- CTR
- -18%YoY
- -46%QoQ
- CVR
- +3%YoY
- +8%QoQ
- CPC
- -15%YoY
- +18%QoQ
- CTR
- +3%YoY
- -24%QoQ
- CVR
- +2%YoY
- +6%QoQ
- CPC
- +2%YoY
- +29%QoQ
- CTR
- +83%YoY
- -8%QoQ
- CVR
- -28%YoY
- +21%QoQ
- CPC
- -51%YoY
- +3%QoQ
