Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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Home Depot also keeps a sharp focus on the ads it will run, primarily selling to home improvement vendors such as kitchen and bath retailer Moen Inc. and power tool manufacturer Ryobi. “These kinds of vendors are sort of low-hanging fruit in terms of reaching shoppers most interested in additional promotions or advertising on a retailer’s site,” says SendTec’s Obeck. “They’re clearly the first potential advertisers for e-retailers to talk with.”
Tangential products and services
As selling ads on e-commerce sites evolves, Obeck foresees a time when, for example, a home improvement e-retailer might also carry ads for vendors of products or services that aren’t carried by the e-retailer but are home-related, such as homeowners insurance. “We do not want to approach advertisers who are not contextually relevant, or who a consumer shopping on an e-retail site might ask, ‘What are they doing here,’” he says.
As for product vendors, the potential ad buyers, there is a compelling argument for purchasing an ad on a retail web site carrying their products that goes beyond merely reaching certain demographics, some e-retailers and experts say. That argument is readiness to buy. “One of the key things about HomeDepot.com customers is they’re buyers,” Obeck contends. “They’re there shopping, not just reading articles.”
To date Internet retailers have taken several avenues for setting up and bolstering ad sales programs for their web sites. In July Netflix, for instance, hired Peggy Fry, former vice president of interactive marketing at AOL Entertainment Group, to head up an in-house ad sales group. Home Depot also has established a small internal team that works with SendTec, which manages the sales force and the creation and deployment of ads on the site.
But before deciding whether to sell ads on their web sites, e-retailers must consider what impact advertising may have on shoppers and customers. “Retailers need to be concerned about introducing too much clutter on their site,” says Forrester Research’s Kim. “If lots of ads actually prevent a consumer from making a purchase decision, it’s likely the consumer will find another place to do their shopping. Retailers must ensure the online shopping experience is a positive one rather than overloading the consumer and creating a bad experience in the name of additional revenue.”
In addition, e-retailers need to consider whether an advertisement will generate more revenue than a merchandising strategy it might replace. “Web site space is valuable,” Foglesong says. “An e-retailer should ensure that an ad program and the customer experience are consistent with their brand, add value for customers and don’t negatively impact customers’ online experiences. If online advertising is done properly, the program should enhance the shopping and research experience.”
Further, e-retailers concerned that shoppers viewing advertisements on their site might drop the e-retailer in favor of the site of a competitor that does not sell ads can adopt a strategy like Home Depot’s, some industry observers say, where all ads on the company’s site link to destinations within the site. “We give vendors the opportunity to build out what essentially are branded sections on HomeDepot.com,” Foglesong says. “And we encourage the advertisers to make the sections as rich and in-depth as possible, with lots of information about the products they sell and the opportunity to integrate multi-media content.”
And in the end, some experts say, it’s that ability to give advertisers a rich web environment and exposure to a wide audience of consumers with related special interests that will fuel increased demand for ad space on e-retailer’s web sites.