Ad Tech Insights
How To Combat Low Margins
The story: Quick commerce businesses, like Gopuff and Delivery Hero, are increasingly turning to advertising as a way to offset the challenges of low margins and high customer servicing costs. In his newsletter, Fix Insider, Founder Simon Andrews highlights that while quick commerce offers convenience, the business model is difficult due to low average order values. To stay competitive, companies like Gopuff are taking control of their advertising capabilities by building their own ad tech infrastructure and using AI to leverage first-party data. Gopuff’s strategy reflects a growing trend among retailers looking to create long-term, sustainable growth.
Delivery Hero, another major player in the quick commerce space, is also betting heavily on advertising. With operations in over 70 countries and a variety of brands, Delivery Hero had the demand to build an advertising empire. The quick commerce brand expects advertising to become a key revenue stream, projecting over €2B in ad revenue by 2024 - 2025.
The takeaway: The shift towards in-house advertising strategies highlights the advantages of owning your entire tech stack, especially in highly competitive sectors like quick commerce and delivery. The increasing role of AI and first-party data can help companies differentiate, but the challenge of scaling across different markets also underscores the need for localized expertise.
Extra Industry Insights
Omnichannel ad platform Skai recently published its Q2 2024 Digital Marketing Quarterly Trends Report. Here’s what you need to know:
- Spending increased YoY in all channels and quarter-over-quarter (QoQ), with overall investment levels continuing to grow in the primary walled garden ecosystems of retail media, paid search, and paid social.
- Despite rising prices and spending in retail media, performance metrics have kept pace as the conversion rate grew 12%, matching the CPC increase, and total conversion volume grew 18%, just one point shy of the spending increase.
- Commerce media drives quarterly growth in search and social, growing at a faster rate than other marketing channels from Q1 to Q2.
- More than half of Skai advertisers in each channel increased YoY spending by at least 5%, while a majority of accounts in retail media and paid search paid higher prices per click.
IAB Europe’s Retail Media Committee developed the Attitudes to Retail Media survey, which is in its first year, and is intended to provide an industry benchmark for retail media adoption, drivers, barriers, and growth areas. Here’s what the survey found:
- Retail Media adoption is still nascent, with just 50% of buyers having partnered with a retailer or RMN for more than one year.
- Half of buyers are reallocating funds from other marketing channels to retail media, particularly from linear TV and performance marketing budgets.
- Most retail media investments focus on on-site opportunities, underscoring potential growth for off-site and in-store advertising this coming year.
- Nearly 90% of buyers are motivated by access to retailer first-party data, and three-quarters of buyers are drawn by the opportunity to reach consumers at the point of sale.
- About 60% of buyers cite RMN fragmentation and the lack of standardization as significant barriers, alongside operational elements and technological requirements.
Kevel Catch-Up
“The Most Successful Business Leaders To Watch In 2024”: Kevel’s Puja Bhola Rios
The business world is dynamic and outsmarting the competition requires proactive leadership. We are elated that The Enterprise World has recognized one such proactive leader, Puja Rios, Kevel’s President & Chief Operating Officer, by featuring her on the cover of their latest issue, “The Most Successful Business Leaders to Watch in 2024.”
Check out the full cover story here.
Keep Learning
WATCH → Season 2 of The ADOTAT Show kicks off with ad tech legend, Terence Kawaja, talking all things cookie-pacalypse, signal loss, and privacy. This hour-long episode is packed with “more no-BS insights than ever.”
READ → Madison and Wall forecast $397B in 2024 ad spend. However, despite their rhetoric, marketers are emphasizing 'performance' over quality content.
LISTEN → Covering Google’s ad tech antitrust trial in Virginia is surreal for anyone who’s been in ad tech as long as Ari Paparo. He knows most of the people on the stand. Join Allison Schiff and Ari in this episode of AdExchanger Talks. (Listening time: 51:08).
