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UK online retailers missing out on advertising revenue

11 Jun 2014

British online retailers are missing out on an estimated 1 billion pound worth of advertising revenues, according to a new report by OC&C Strategy Consultants, by choosing not to sell advertising space on their own websites. The ‘Creating Value From Every Visit’ report revealed that only two

of the UK’s top 10 retailers choose to sell media space to third parties on their websites, compared to eight of the top 10 retailers in the US, where the practice is more established.

With an estimated 7.5 billion page views a month, British online retailers are among some of the most visited websites by consumers, however, OC&C found that digital media revenues from selling search, display and trade advertising amounted to less than 150 million pounds for UK retail websites over the past year. By comparison, news websites made approximately 400 million pounds in digital media revenues, despite receiving only 3 billion page views.

Anita Balchandani, partner at OC&C, said: “Although the UK is one of the most advanced online retail markets in the world, British retailers are behind the curve when it comes to monetising shoppers as well as browsers on their website.

“E-retailers have been concerned that advertising on their websites could potentially deflect consumers away from their site. They have also been worried by the effects that promotional messages on their website may have on consumer perceptions of their brand. Finally, retailers have also expressed some operational concerns around internal accountability structures – for many retailers it is not clear who in the organisation would own this revenue stream.”

New report showcases potential of on-side advertising for retailers

OC&C’s research found that the presence of ads on a retailer’s website had “very little impact” on consumers’ purchasing decisions. With only 3 percent of consumers referenced ‘having no sponsored links’ as an important purchasing factor, ranking well behind ‘value for money’ listed by 56 percent, ‘quality of products’ by 43 percent and ‘free delivery’ important to 33 percent.

Additional research by Nielsen of several US e-retailers also revealed no significant changes in conversion rate after launching third party onsite advertising.

Cliff Hinrichs, head of e-commerce partnerships at Google, added: "E-commerce sites haven’t traditionally captured any value from ‘browsers’ – the 95 percent of users who visit an e-retailer but don’t buy anything.

“In addition, the remaining 3-5 percent of ‘shoppers’ are most interested in low prices. Capturing value from ‘browsers’ to subsidise lower prices is already an established strategy among some internet ‘pure play’ retailers.”

OC&C reveals that there are many ways in which online retailers could add on-site monetisation, they could go for the traditional ‘display’ banner ads, which are visually appealing with no user input needed, or they could go for ‘featured products’, which fits well into most websites and as they are highly targeted could be useful to shoppers. The third option is to use referrals and sponsored links, which can be less intrusive and can be highly targeted.

It is this “huge untapped source” of a potential 1 billion pounds in revenue that means it is something all online retailers should consider.

Balchandani explains: “There is no one-size-fits-all solution for all everyone. There are a number of options available, ranging from less intrusive solution that redirect a retailer’s traffic to other areas of their websites, to more profit-led implementations that are typically funded by third parties and lead traffic offsite.

“In practice, each retailer needs to find a model that’s right for them and implement it in the right way. Crucial to this is assigning a clear owner for media revenues who is empowered to take decisions, and who will help define the scale of the opportunity and how they want to deploy the advertising solution– whether by partnering with a third party provider or developing in-house capabilities.”

Image: Amazon.co.uk