What is the best model for your Sponsored Product Ads offering?
What we learned: Everyone knows that Amazon offers CPC-based Sponsored Product Ads. But what about the other marketplaces? Did you know that eBay plans to add a CPC-based model next to their CPA-based Promoted Listings? And what about the retail media advertising programs of the hidden champion marketplaces?
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China’s Digital Ad Spending 2019
What we learned: Alibaba’s retail media operations capture roughly 33% of digital media ad spend in China. That raises a clear question: can retail media in the US and the western world become as significant? In comparison, Amazon is projected to capture around 9% of digital ad spend in the US.
The 2019 Online Marketplaces Report
What we learned: eCommerce marketplaces disrupt the traditional eCommerce model. The numbers from the 2019 Online Marketplaces Report estimate that marketplace GMV worldwide accounts for roughly 50% of global eCommerce sales, exhibiting a growth of 20% from 2017 to 2018.
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(From Ben Thompson's "Stratechery" blog)
What we learned: In this classic article from 2017, Ben defines a comprehensive framework on how to think about platforms. He uses the term aggregator to describe the most important attributes of a platform: Direct user interaction and zero marginal costs to serve new users.
This definition excludes the margin-based e-commerce businesses, as the marginal cost of goods sold (COGS) and logistics costs to serve new shoppers are not zero. But it applies to marketplaces and many other aggregators like Netflix and and AirBnB.
If you haven't read anything from Ben Thompson, prepare for a mind-blowing experience.