Why did you choose to attend NY KnowGO? What are you hoping to get out of it?
I’ve attended quite a few conferences, like Digiday conferences, that have brought great value to our teams. But NY KnowGO seems to dive deeper into co-op advertising. I unfortunately was unable to attend last year, but I sent someone from my team. They said it was fantastic, with good speakers giving valuable and relevant information, so I’m excited to be a part of it in 2019.
What are your priorities or philosophy with regards to Sponsored Product Ads?
We integrated sponsored products into Overstock to provide our partners - which are our brands - with an effective advertising tool. The previous advertising tools we had available to them were much more static. They were “buy this branded ad for this one week on this category page.” They worked, and they built brand awareness, but they just weren’t super effective in driving sales. So, when we were thinking about the consideration piece of the marketing funnel, we saw this as the next big opportunity - many years ago when we started doing sponsored products – to give these partners something that’s going to perform well for them.
“…we saw this as the next big opportunity - many years ago when we started doing sponsored products – to give these partners something that’s going to perform well for them.”
In building this, we ensured it was a win all three ways: 1) That it doesn’t hurt the customer experience in any way, 2) The tool helps the partner increase sales, and 3)
We bring incremental revenue through ad sales. Then we can use those incremental ad dollars and reinvest them back into our other marketing efforts.
How are you addressing the idea of swim lanes on your site - Network or Private Marketplace (PMP)? What is your current opinion on the state of the network model vs. the PMP model?
In terms of the Network-model, every retailer is different and has their own unique take on this. From our position: It doesn’t work. Not our model. We don’t like it. It’s more threatening to us than it helps, and our journey with the Network-model is we tried it for a short period of time. The purpose of working with a Network-platform was they were going to bring us ad dollars from pools of money we couldn’t touch. Ad dollars from agencies we don’t have contact or close relationships with. The incentive was essentially: we would get some incremental dollars by integrating with this Network.
What we ended up finding out is they were building a massive sales team – which we knew, and we talked to them about that. We said “Okay, you guys have to be careful and make sure you never talk to someone we are talking to, because we do have really good relationships with most of the brands we work with." So, we ended up running into the problem – they were talking to folks that we talk to. They were basically telling them: “You shouldn’t give Overstock your co-op ad dollars. You should give us your co-op ad dollars and then we can drive really good returns for you, and we can handle where those dollars go.” That was the turning point where we essentially said “Nope. We’re done. We’re not doing this anymore.”
Ever since then we’ve continued to put thought into the Network-model, with new players are entering into that space too. Some have approached us and said: “Hey, you want to try this?” And we’ve said no, it doesn’t make sense for us. There’s more risk than any potential reward. Our relationships with our partners, our brands, is probably one of the most valuable things we hold. So, naturally, we keep that really close to our chest and ensure that nothing is going to disrupt that. I have an entire team, that is all they do: Continuing to build those relationships with our partners and ensure they are giving us the dollars and spending them in the right places. If you put a third party in that mix, a third party that starts talking to those partners, that entire relationship starts to crumble. A big portion of our success is built on these relationships.
“If you put a third party in that mix, a third party that starts talking to those partners,that entire relationship starts to crumble. A big portion of our success is built on these relationships.”
So yeah, in a nutshell: We are very much against the Network-model. Now, that’s for us. I would never tell every retailer that you should never do the Network-model. There are retailers that don’t have a team like what I have here, so they don’t have the resources to go and tap into these dollars. However, I would encourage those retailers “It’s do-able. You can do it with a little guidance. You can build a team and you can capture more of that margin, instead of having this 20%, or even 30%, stripped out”. There’s huge value in doing it themselves and yes, it takes a long time. Yes, you might not make as much money in the beginning. You could do a hybrid-model, if you wanted to. I know a lot of people are thinking about that as the future, the hybrid model of Network and PMP / white-label. For some people that might work, but for us the Network-model just jeopardizes too much, so we stay completely away from that.
From the brand’s or supplier’s perspective, they’ll have mixed feelings on it too. Some of them want something easy to use. They want one place they can go to and put all their co-op dollars in. However, a lot of them, how they think about their co-op dollars is very much associated with the sales of the specific retailers. If they are putting all their co-op dollars into a Network platform, they might throttle those dollars more to specific retailers, for performance reasons. Well, what can end up happening is the brand ends up seeing “Oh my gosh, I ended up spending 10% of my overall sales in this one retailer, that’s way too high! And I only spent 1% on this one.” So, they typically like to manage how much funds are going to one or the other, but there are a lot of retailers that don’t have the capability to really deliver on something like sponsored products.
Obviously, there are PMP platforms out there. I know you guys are going to be getting into that mix soon, so they have options, but it takes work. It’s a lot more work than an AdTech company giving you a tag and you throwing it onto your page. There’s a lot more to it than that.
In an ideal world, where agreements are stuck to, would the Network-model be viable for you?
Because we have a one-on-one relationship with most of the companies that do business on our site, we have found more success for us and our partners controlling the ad spend while still maintaining a high-quality experience for our customers.
Let’s move onto performance advertising trends. With AI, ML, and automation, publishers like Google, Facebook, and Amazon are taking control away in an attempt to level the playing field. What does this mean for advertisers? How can advertisers still differentiate themselves?
That’s a really good question and something that we have discussed at Overstock. We have a very sophisticated team in a wide-range of disciplines, including a Chief Algorithms Officer, whose role is to implement AI and ML across the entire company. I was recently brainstorming with our CMO about implementing this game-changing technology while still keeping control over it, because there needs to be some balance. Something Amazon has done well, in the sense that it has benefited them, they’ve created this environment where brands can still have a lot of control over what they do and how they do it.
So, even for Sponsored Products specifically, they can change the keywords they go after, they can constantly keep changing the bids, there’s ways for them to change the image they are using, things like that. They open this door of gamification where so many brands are willing to pay, and do so because the system has shown results.
However, Amazon knows that they could just create the whole thing automated and it would work for everyone pretty much the same, but they try to create this environment where people can gamify it. This helps make Amazon more money as people learn the system and game it.
AI and ML are integrated in almost every facetof Overstock Retail, and these technologies are very present in sponsored products and co-op advertising. However, there needs to be some balance, as I talked about earlier. We need to allow partners to gamify it. I believe that there are more automated ways of delivering performance while still knowing what the partners want and doing product management. By getting into the nitty-gritty, finding out what partners are doing and what they want to accomplish, we are able to build the appropriate tools to fulfill these business needs. There are pros and cons to both sides of it, and I see value in finding the middle or the right balance between the two.