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How to Build Your Ecommerce Brand as Advertising Prices Increase in 2022

By November 17, 2022 No Comments

In order to be successful in today’s online climate, you have to hone in on developing and owning your ecommerce brand. Because let’s be honest…how are you going to compete with every other third party seller on Amazon?

So whether it’s private label or your own design, you need your own products. And following closely behind having products is your brand advertising.

The ad scene is changing, and it’s changing quickly – which for ecommerce sellers is nothing new, right? Your realm requires constant adaptation.

So, it’s not news that the way you acquire customers and how much it costs to do that (AKA your customer acquisition cost) is critical.

Previously, several ecommerce sellers relied on Google, Facebook, Amazon, and other online platforms for customer acquisition. It’s shifting, though. It’s not as easy as clicking a button and setting up Google or Facebook advertising for ecommerce brands to be profitable.

Many online platforms are going through several privacy changes, jacking up the prices of ad spend. They’ve become unpredictable, which is not a good thing for securing the financial future of your ecommerce brand.

As ecommerce accountants working with many larger brands, we see ad spend impacting ecommerce businesses’ profitability and in some cases, pushing the business into the red.

Unfortunately, we don’t see ad spend going down any time soon.

The reality is, all ad platforms are continually tweaking their costs and algorithms to optimize their revenue. Sellers need to keep a close eye on 3 things: ad spend (real time or daily), Return On Advertising Spend (ROAS), and runaway ad spend on current ad campaigns.

Out of these three metrics, ROAS is the key metric to track here. There are some sellers who are successful with $0 ad spend, using email marketing and other organic approaches.

As these online platforms are under scrutiny, they’re going to continue to try to grow their revenue, meaning the ad rates will continue to climb. Unsurprising to sellers, that’s detrimental to ecommerce brands, where an advertising budget can’t afford to get too big, or else you throw off your whole business model.

To stay profitable, ecommerce sellers have to pivot from paying for clicks to developing a strategy for long-term organic traffic.

Check out this clip from our recent ecommerce panel discussion to learn more about:

  • The current advertising climate and its effect on ecommerce sellers
  • How customer acquisition (and its cost) is critical to building your ecommerce brand
  • Current ad spend trends and runaway ad spend
  • How recent privacy changes on online platforms are affecting ad spend for ecommerce brands

Video Transcript

Scott Scharf: Jermaine, do you wanna talk to us a little bit about ad spend and anything else that are the key things you are seeing?

Jermaine Brown: I think how you acquire customers and how much it costs to acquire that customer is really critical. I think previously a lot of e-commerce sellers could rely on Google, Facebook, or just other platforms to acquire their customers.

What’s happening now is those platforms themselves are going through a lot of changes with privacy and other things. And so they are changing the ad rates and that is making the cost to acquire customers unpredictable and go up, which means that some of the e-commerce sellers are becoming unprofitable and there’s nothing that they can do about it, right? It has nothing to do with their service or their products or anything like that.

I think that what you’re gonna start to see now is people they understood before, but it’s gonna become critical and imperative to build a brand, to offer content, and to attract customers in more of a long-tail organic way instead of just paying for clicks and acquiring customers that way. 

I know Philip can talk to this a little bit more, but I don’t think that ad spend is gonna go down anytime soon. I think that as these platforms are under attack, they’re gonna continue to try to maintain and grow their revenue, so ad rates are gonna go up. And that’s gonna be detrimental to e-commerce sellers. If you budget for X percent, and it’s now 25% or 50% or double that, that throws your whole business model out of whack sometimes.

And so I think it’s really important for e-commerce sellers to understand that, to watch it, have a pulse on it, and to have an alternative strategy if they don’t have one now. Otherwise, they could go under.

Scott Scharf: That’s great. And one of the things I know the team knows is to keep an eye on our clients’ ad spend. Because a lot of times they have runaway ad spend and they have deals that they set up, set up the programs wrong, set them up in parallel, and all of a sudden you’re just burning through money. And they don’t catch it fast enough.

Philip Gossling: Yeah and to comment real quick on the ad spend…we’re seeing it, too. I think retailers across the board are seeing an increase, especially in the last few years. Not only do you have platforms/marketplaces raising the rates but the competition is also increasing. It’s easier to get online.

Also, you have major retailers like Walmart, Amazon, Target, and other big retailers who carry a large breadth of products trying to protect their top lines, trying to compete against a super strong, crazy 2020 and 2021. And we’re seeing these ad rates go up.

So, if you have retailers not tracking that or, if it was profitable, it’s very likely that it’s quickly becoming not profitable. And it’s really important to have somebody on staff at those companies that is analytical and able to keep an eye on this and push back against the ad companies they’re working with to make sure they are continuing to optimize that ad spend and keep tabs on it because it continues to grow. And pay-per-click used to be the easiest way to get profitable new customers.

So, I think that also what these guys said was just building a brand is where we see it going, too. Making sure you’re spending that time too, to help build a brand and find other marketing channels away from pay-per-click. You’d still need to stay in there, but continue to try to build a brand and build an experience around your site and what you’re selling, because that just makes it easier in the long run.

Scott Scharf: Jermaine, you had some comments about how the privacy changes gonna impact ad spend.

Jermaine Brown: Yeah, so I think what you’re seeing now is Apple decided to make some changes that impacted, I think Facebook, maybe even Google. And I think that you’re seeing a lot of those companies hurting.

I think Facebook for the first time reported that they didn’t grow and are planning on spending – don’t quote me on the number but –  $10 billion on new initiatives. And so they’re gonna have to make that revenue up as in some ways, some form, some fashion, and it’s gonna come in likely price increases to customers i.e. higher ad rates.

So, as this privacy game kind of plays out, I think that the paid advertising that we’ve seen historically is gonna look vastly different going forward. And I think the ecommerce sellers need to have another strategy and be abreast of what’s going on with these larger platforms.

To understand that “I can’t just rely on those guys to acquire my customers. I need to have another strategy. I need to be adding value to customers in a different way through content education or just some other way.” But paying for clicks is not gonna be the only viable way to acquire customers.

Acuity CTO Scott Scharf moderated this ecommerce panel at AcuityCon 2022. The panel featured:

More Resources To Build Your Ecommerce Brand

Interested in hearing more from this panel of ecommerce entrepreneurs? Watch the full panel discussion on our ecommerce YouTube channel, @CatchingCloudsAcademy.

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