Groupon says its focus is on the bottom line, rather than top-line growth.
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For example, a Hilton hotel near Disney World can advertise in a featured location at the top of Expedia’s Orlando hotel search results, paying for each click on its featured listing. Product placement click prices are usually set either by negotiation or by a live auction.
Another, newer strategy involves an online retailer creating behavior-driven advertising opportunities. Rather than selling fixed contextual positions within the online store, a retailer can enable advertisers to target individual shoppers with highly relevant messages based on past browsing and purchasing behavior.
In the offline world, this would be like a physical retailer charging a supplier to send a direct mail piece to customers with specific attributes—for example, allowing Pampers to send a coupon for diapers to customers who recently purchased baby supplies.
In the online world, the opportunities for targeting are greatly expanded by the amount of anonymous data retailers can gather as shoppers browse a web site and demonstrate intent.
A good example of this is Expedia’s PassportAds program, where that Orlando Hilton hotel can pay to target ads to individuals who have shopped for Orlando on Expedia over a given time period, even when those individuals are visiting other web sites—including retail sites—unrelated to travel. Pricing models for behavioral media vary.
Implemented well, all of these strategies offer value for advertisers, utility for customers and new revenue streams for online retailers.
The first 15 years of online retail saw breakneck growth and little reason to focus on anything but transactional revenue. As the medium matures, the smartest retailers will recognize they are sitting on a gold mine of media impressions and consumer behaviors that can keep the bottom line growing even if transactional growth slows. Online retailers, it’s time to step up your ad game and unlock the full profit potential of your business.
And who knows, maybe next time I shop for toddler toys, I’ll see ads for plastic fruit and rubber vegetables—things any proud toy kitchen owner is bound to need.
Jonathan Opdyke is CEO of HookLogic Inc., a marketing technology company that helps online retailers maximize the value of their shopper audience. When he is not toy shopping for his daughter, he can be reached at email@example.com.