Month: February 2019

Amazon’s $3.5 billion ad business keeps growing.

In its latest expansion, Amazon has started to run Sponsored Products ads on its AmazonFresh e-commerce platform in the U.S. According to an email that Amazon has sent to ad buyers announcing the news, ads for AmazonFresh products will appear within Amazon’s regular search results and product details pages as well as within AmazonFresh’s search results.

The Sponsored Products ads for AmazonFresh items are the same as the version already available for non-AmazonFresh products, which may make them easier for advertisers to adopt, according to Rina Yashayeva, vp of marketplace strategy at Stella Rising, an agency that specializes in Amazon advertising. The ads can be targeted based on keywords, and advertisers will pay when people click on the ads, even if they do not purchase the product. The ads can appear within Amazon’s regular search results and product details pages as well as within AmazonFresh’s search results, according to an email that Amazon has sent to ad buyers announcing the news. That marks the first time that Amazon has allowed ads within AmazonFresh search results. On Feb. 28, a search for “chips” in Amazon’s mobile app resulted in an AmazonFresh ad for Lay’s potato chips appearing atop the organic product listings. Typically, Amazon intersperses two to four Sponsored Products ads among the organic product listings on a search results page, according to Will Margaritis, svp of e-commerce at Dentsu Aegis Network.

The ads will only be shown to people in the U.S. who are eligible to shop AmazonFresh, which is only available in certain cities like Los Angeles and New York City, but that will include people who are not AmazonFresh members, said Yashayeva. Amazon’s grocery delivery service is only available to Amazon Prime customers, but those customers have to pay an extra $15 a month for AmazonFresh.

An Amazon spokesperson did not respond to a request for comment by press time.

Allowing food and CPG marketers to promote their AmazonFresh products could bolster Amazon’s position against rivals like Walmart, Kroger and Target that also operate grocery delivery and advertising businesses. “With food being one of the most underpenetrated digital sales categories in the country, Amazon has been increasing their share of the market by double digits,” said Yashayeva. She cited an estimate from e-commerce analytics firm One Click Retail that pegged Amazon’s grocery sales growing by 40 percent year over year to $650 million in the second quarter of 2018.

However, with the roll-out of AmazonFresh ads, Amazon may be more likely to steal ad dollars away from Kroger, Walmart and Target than actual product sales. People may browse food and CPG products on Amazon to check out reviews as a form of research, but they are more likely to purchase those products from a physical store, according to Margaritis. As a result, he advised that food and CPG brands should think of Amazon’s latest ad product as a way to raise people’s awareness of new products, like a food flavor or product feature. “Amazon really is a branding opportunity,” Margaritis said.

If it turns out that Amazon customers are much more likely to click on the AmazonFresh ads than to follow through and purchase the products through AmazonFresh, that would complicate advertisers’ abilities to judge the success of their campaigns. Advertisers typically evaluate their Amazon ads based on the sales they are able to deliver, but that’s only possible if the sale is made within Amazon’s platform. “It’s a problem with Amazon as a whole since Amazon gives you such a direct tie to a sale. Brands often struggle to understand the impact off-Amazon,” Margaritis said.

Amazon could use its ownership of Whole Foods to address this potential attribution issue for AmazonFresh ads. A person who clicks on an ad for an AmazonFresh product may not purchase it from AmazonFresh or even subscribe to the grocery delivery service, but they might stop in a Whole Foods store and purchase it there, potentially even scanning their Amazon Prime membership at checkout. In that situation, Amazon would be able to associate the in-store sale with the online ad. Walmart already provides that kind of insight for brands to see how online browsing contributes to in-store sales, said Margaritis, but for Amazon, “that’s probably a ways down the road.”

The post Amazon’s next ad move: AmazonFresh ‘sponsored products’ appeared first on Digiday.

British commercial broadcaster Channel 4 has expanded its subscription on-demand service after running tests last November.

The broadcaster — home to shows like “The Great British Bake Off” and “Shipwrecked” — has 18 million registered users to its video on demand service, All 4. Now, more registered users have the option to pay £3.99 ($5.31) to watch shows without ads before it decides to extend the service, All 4 +, over the coming months.

“We’re getting serious about a paid upgrade to the free service,” said Richard Davidson-Houston, head of All 4. According to the broadcaster, 2018 was the most successful year for All 4 since it launched in 2006, with views up 25 percent year over year.

Broadcasters have enjoyed buoyant linear ad revenues to sustain them through trying times in digital media. But increasingly, they’re diversifying revenue streams to manage the slowing growth in linear ad revenue, while online video ad revenue is increasingly being snatched by competing services like YouTube and Facebook. For the most part, viewers can be more effectively monetized through subscriptions rather than ads, and making existing content available for a small price is all additional revenue. U.K. commercial broadcaster ITV launched its ad-free paid-for version, ITV Hub+, two years ago and has nearly 300,000 subscribers. This week, ITV announced BritBox, a collaborative effort from the BBC and ITV to rival Netflix, was expanding to the U.K.

To grow All 4 + in a crowded market Channel 4 will need to highlight the content people are willing to pay for. All 4 has licensed shows from media brands like Adult Swim and Vice, organizing these in thematic collections, to beef up its content aimed at younger viewers who are straying to Netflix and other services. The broadcaster said there has been a “fundamental shift” in viewing on All 4 over the last 12 to 18 months led by a 50 percent rise in box-set viewing year over year in 2018.

Channel 4 has historically catered to the 18- to 24-year-old cohort and still reaches more than rival public service broadcasters across its whole channel portfolio, according to Ampere Analysis.

“The challenge of the public service broadcasters is not just losing viewing but also a small handful of viewers entirely,” said Richard Broughton, research director at Ampere. The firm’s stats show a small but steady decline in reach of 2 percent over the last two years. Advertisers rely on reach to avoid showing the same ad to the same people, which has kept TV CPMs high.

Meanwhile, viewers, particularly younger ones, are switching to services like Netflix and Amazon. To be clear, All 4 + isn’t as much a competitor to Netflix as an accompaniment. People are stacking up more than one subscriptions service: In 2015, 85 percent of U.K. households that had subscription on-demand services had just one. At the end of 2018, this dropped to 43 percent of households with just one, while 32 percent of households took out two video subscriptions, 12 percent had three and 14 percent had four or more.

ITV Hub+ shows there is some market for a premium paid-for service. ITV Hub has 25 million registered users and just under 300,000 paying for its premium version, according to ITV’s financial results. A conversion of less than 1 percent is fairly low, but ITV Hub+ doesn’t offer much more in terms of additional or exclusive content, said Irina Kornilova, principal analyst at analysis firm IHS Markit. According to estimates from Ampere, ITV made £8 million ($10.6 million) from ITV Hub+ subscribers in 2018 and is projected to make £15 million ($20 million) in 2019. Digital content licensing to third parties would likely bring in revenue worth multiple tens of millions.

“The tradeoff is how quickly can you grow that subscriber base if you want to offset the loss of licensing revenue if you decide to pull content from third parties like Netflix,” said Kornilova.

“Uniquely, 50 percent of All 4’s viewing is archive, up from 41 percent last year,” said Josh Krichefski, CEO at MediaCom UK. “Initially, you’d think it would make sense for Channel 4 to pull archive content from Netflix.” Based on the revenue generation estimates versus the licensing income, it’s unlikely content would be immediately pulled, he said, yet All 4 would have the benefit of cross-promoting content back to its own platforms.

Successful subscription services need long-term investment — Netflix famously isn’t profitable and is sinking more cash into acquiring new and exclusive content — making heavy investment from public service broadcasters difficult. Instead, these can offer useful learnings on catalog refreshing, subscriber acquisition costs and how to market their content for when they do build larger-scale platforms in the future to help insulate them from further declines in ad revenues.

Research firm IHS Markit estimates traditional TV ad revenue rose just 9 percent across France, Germany, Italy, Spain and the U.K. between 2014 and 2018, while that online video ad revenue soared 187 percent.

“A lot of it is going to Facebook and YouTube,” said Kornilova. “They are eating into broadcaster shares. Broadcasters have to start experimenting with other revenue streams as market share drops. They are in a position where this isn’t a nice to-have, it’s become critical.”

IHS Markit estimates Facebook and Google captured 65 percent of online video ad revenue across the five largest European markets in 2018; other ad-funded online video platforms held 10 percent, leaving broadcasters with a 25 percent share.

For broadcasters, the race is on to become one of the accompanying services to Netflix or Amazon.

“There’s a general rule in TV that U.K. viewers spend 85 percent of their time with five channels,” said Broughton. “The future of subscription services is probably not a million miles from that. If you fragment the market too much, no one benefits. Five options will probably be the max.”

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Today, JCPenney is pulling the cord on the men’s apparel subscription service it tested in partnership with subscription startup Bombfell.

The service, which was live for two years, allowed subscribers to receive a monthly selection of clothes from JCPenney’s “Big and Tall” brands. The program was priced similar to Bombfell’s service, which charges a $20 styling fee, but JCPenney customers paid less for each item if they decided to keep more. JCPenney and Bombfell sent emails to affected customers two weeks ago. News that the service was ending first broke Wednesday.

Encouraged by the popularity of styling services like Bombfell, Stitch Fix and Rent the Runway, retailers like JCPenney have proven eager to develop their own services that allow customers to receive clothes on a recurring basis, either via subscription or rental services. American Eagle started piloting a subscription rental service this year. Express also launched a rental subscription service last year, while Ann Taylor launched its ‘Infinite Style’ rental service in 2017. Gap tried a subscription kids’ clothing service last year but ended it after just 14 months.

The model is appealing, as traditional retailers struggle with declining foot traffic and market share shifting to online competitors. Subscription services allow for retailers to build a recurring revenue model at a time when many of them are trying to fend off digitally native competitors. If retailers include a style quiz or ask customers to pick and choose which items they want to receive from a certain selection each month, they can also get better insight into what clothing trends their customers are currently interested in. It also helps them move inventory more quickly.

“In our perspective, subscription is a feature and not a business model when it comes to physical products in the lifestyle space,” Ashwin Ramasamy, the co-founder of Pipecandy, an e-commerce market intelligence company, said in an email. He said that the acquisition costs of customers through digital channels have gotten higher as more and more retailers and startups are getting into subscription services. He also said that many of the startups in subscription services have found it difficult to scale beyond a certain revenue level.

“Some niches, like kids’ clothing and toys will continue to do well,” Ramasamy said. “It’s one thing to be a $10 million brand, and it’s another to be a $100 million brand. We have seen growth stalling at the $25 million mark due to an insufficient total addressable market size that is interested in subscription clothing.”

Then there’s the issue of churn. Retailers not only have to sign up more customers every month, but convince existing ones to stick with the service. A McKinsey survey of 5,000 U.S. consumers last year found that 40 percent of e-commerce subscribers have canceled their subscriptions.

“There’s fundamentally tension in subscription models — that is, how do you basically get people to pay for the service but not use it that heavily, because those are your most profitable people?” Forrester retail analyst Sucharita Kodali said in a phone interview.

With its subscription service, JCPenney may have also faced a unique challenge in that it was pushing a service geared toward men, when the majority of its shoppers are women. Kodali said that in a survey of 4,770 shoppers Forrester conducted in the first quarter of last year, female respondents who said they shopped online at JC Penney within the last three months outnumbered male respondents who said they shopped online at JCPenney during that same time period by a 2 to 1 ration.

Still, when faced with dwindling foot traffic in physical stores, it’s not hard to see why retailers are still turning to subscription models. And solutions are popping up to make it easier for retailers to launch the service.

Snap+Style Business, a tech company that builds tools to help retailers get more data on their customers, recently launched a turnkey service with lingerie brand Cosabella as its first customer, that helps retailers build personalized subscription boxes, using surveys that ask them about their personal style and body type.

“By offering a subscription, [retailers] get high engagement; it builds brand loyalty and personalization. Because [customers] are the ones telling you exactly what it is they like and what they don’t like,” said Anna Jensen, the co-founder and chief business officer of Snap+Style Business.

And while some retailers have struggled, that doesn’t mean that no one can find value in a recurring styling service — Stitch Fix has been profitable since late 2014 and went public in 2017.

Kodali said that if any retailers are going to find success in subscription services, it’s likely going to be department stores, which work with enough brands to easily fill subscription boxes every month. But she said that retailers should also consider some kind of twist on a loyalty program, where they could sign up to receive store credit every month, but they could roll over that credit if they don’t use it.

“The way that these subscription models work is, there’s a huge reverse logistics element to it,” Kodali said, referring to subscribers who might decide to return or exchange some items. “I know for a fact that JCPenney is a company that abhors reverse logistics. Why would they even have done this given that they have a cultural aversion to so many elements of this?”

The post Why traditional retailers struggle to figure out subscription services appeared first on Digiday.

Tesla is shifting all its global sales online to cut costs as it begins taking orders for the $35,000 version of its Model 3 compact car.

Uber and Lyft are planning to give some drivers the chance to take part in their initial public offerings, a rare move that would grant them access to two of the most hotly anticipated IPOs ever.

A SpaceX flight set for early Saturday won’t include crew but will test hardware reliability of the Crew Dragon capsule, as the U.S. tries to get back into the business of transporting astronauts into space.

Amazon is starting to let brand owners delete listings on its site for products they deem fake, a shift in its struggle to fight counterfeiters that cedes some responsibility to others.

A New York regulator is ramping up a promised investigation of how Facebook gathered sensitive personal information from popular smartphone applications, after a report by The Wall Street Journal revealed that many such apps were sending the social-media giant data including users’ body weight and menstrual cycles.

Biting your tongue at yet another questionable article shared in your message group of friends and family? Add artificial-intelligence fact-checker Meiyu as a member, she will jump in with ‘False’ and explain why it’s wrong; quieter mothers-in-law.

The Seattle City Council last year repealed a per-employee tax after Amazon threatened not to occupy a new office tower. Now, Amazon won’t occupy the tower anyway.