Sponsored Product Ads & Co-op Advertising: The Perfect Match

By Luke Metcalfe

on

August 6, 2018

Welcome to the World of Sponsored Product Ads (SPAs)

Every day, millions of them show up online. Also known as “Featured” or “Recommended” Ads, they service multiple verticals and appear on numerous retailer sites—as well as Amazon (which runs its own “Sponsored Product Ads”). Their prominent display makes them more appealing to buyers…generating more exposure, clicks and business for the brands that pay for them.

Keep an eye out for them next time you’re online. You’ll spot them on homepages, category pages, search results pages and product details pages. On Amazon they appear on top of, or within, the search results.

Amazon’s Push into Sponsored Product Ads

Amazon only entered the SPA arena relatively late, but its vast resources have already made it a heavyweight prospect. To put things into perspective, its Sponsored Product Ads made $2 billion in just Q1 of this year. Amazon operates a walled garden; unlike alternative networks, 100 percent of spend on the platform stays there.

The Power of Co-op Marketing

Sponsored Ads represent big business for retailers—and a huge opportunity to monetize their websites. It’s a game of high margins, with brands jostling their rivals for ad space supremacy. The landscape forms a “who’s who” of multi-brand retailers. From Kohl’s and Target in the U.S. to Argos and Morrisons in the U.K: most of the big players support non-organic adverts within their product pages. And how is this relationship funded? By a practice that might just be marketing’s most powerful secret weapon.

In co-op marketing, brands agree to share the cost of an ad with a retailer for extra visibility. Brands allocate co-op dollars according to a percentage of the retailers’ sales (rewarding partners who are already performing). Since the early days of catalogs and TV ads retailers have benefited from the format, which helps them to boost their budgets and product turnover via subsidised means.

Fast forward to 2018, and digital trumps other formats as a more transparent way to advertise. While representing only a fraction of the total co-op market ($70 billion per year) its ascendance has been swift. Digital co-op spend has swollen to $1.7 billion annually. Combined with SPAs, it forms the perfect match.

Brands increasingly spend co-op funds to unlock new ad opportunities. And it’s a huge incentive—well within reach—for thousands of retailers who don’t currently support them.

Longer term, the collaboration between retailers and their co-op vendor partners has grown even more complex and integrated. 

Examining the Status Quo: Who Operates Sponsored Product Ads?

The Sponsored Product Ads market (also called Vendor Marketing Programs, Promoted Product Ads or Sponsored Product Listing Ads) mirrors other programmatic ad systems. HookLogic, a Criteo-backed venture leads the market, with Google in hot pursuit. Other players include Spotfront and Mabaya and other vendors, which don’t sell to brands directly. Rather, their technology facilitates integration with the network.

Industry leaders. World-class speakers.

Meet them on Oct.10 for the New York Know Go: a private event on Co-op Marketing, Sponsored Product Ads and the future of Retail Media.

·         Network with retailers, brands and technology vendors.

·         Discover the best ways to spend and measure co-op funds.

·         Learn how to compete with the industry giants.

Click here for tickets

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