E-tailers Seek Revenue Boost From Ads That May Even Tout Rivals
NEW YORK (AdAge.com) -- Don't be surprised if the next time you're shopping on Target.com, Walmart.com or any other major retailer, you see ads -- sometimes for competing stores.
Consumers have gotten used to seeing sponsored links across the web, with just about every major publisher from The New York Times to Food Network serving them up. Google is the largest seller of text ads through its AdSense program (that also includes display ads), which collectively generated $5.2 billion in revenue for publishers in 2009.
E-commerce sites have largely steered clear of the ads. They are, after all, in the business of selling product, and ads from competitors could direct traffic to the competition.?If properly targeted, sponsored links -- text ads that most often appear alongside search results -- will compete with offers on the page.
Retailers as sellers of advertising
But as the retail environment got tougher over the past few years, more stores started to add the links as they look beyond the sale for ways to earn revenue from visitors. Retailers, including Target, Walmart and CSN Stores, have all partnered with Google to add the links. Google AdSense, the leader in the space, declined to reveal its retail clients, but said it's seeing more and more retailers sign on.
"The retail world is starting to realize that digital assets have an incredible value from a media perspective," said Chris O'Neill, director-retail at Google. "This program unlocks that value. ... And certainly in tougher times all businesses are looking for additional sources of revenue."
Indeed, Walmart's sponsored links earn revenue via clicks or impressions from its visitors -- and it has a lot of visitors. In October (prior to the retailer's annual holiday shopping surge that inflates the numbers) Walmart had 31.8 million unique visitors, according to ComScore. That ranks it as the 24th-largest web property in the U.S. and puts it in the same league with big publishers such as Disney (32 million uniques) that are major sellers of advertising.
Walmart did not respond to a request for comment about its use of sponsored links.
"Everyone is trying to figure out ways to make money off of the traffic on their site," said Sucharita Mulpuru, VP-principal analyst at Forrester. "Ninety-seven percent of visitors to any given site don't convert, so this is a way to get money from that 97%."
CSN Stores, the third-largest online retailer of home goods in the U.S., began testing AdSense in January and is now rolling it out more broadly. The retailer said it is looking at the program as an additional revenue stream, as well as a service to its customers.
"It's still too early to tell how much of a revenue stream there will be, but we're definitely encouraged by the results so far," said Sean Anderson, CSN Stores' marketing researching analyst.
Mr. Anderson said the links benefit customers by directing them to other sites if they don't find what they're looking for. "The ones that are getting clicked on are [clicked on by] customers who weren't likely to place an order with us," he said.
Retailers also have the ability to block certain ads from appearing. Target, for example, can block Walmart ads. A search for children's clothing at Target.com brought up sponsored links for Ralph Lauren, Children's Place, Land's End and Aeropostale, all higher-end options. And while those are competitors to Target in a broad sense, they're not likely to tempt the mom who is shopping Target for bargains.
Forrester's Ms. Mulpuru is skeptical of the customer-service claims, however. "At best it's an alternative revenue stream," she said, although even then the additional revenue might not be worth the impact the links could have on consumers' perception of the brand.
And while sending customers to rival sites is a valid concern, Ms. Mulpuru said that because click-throughs are typically low and the links are usually placed in an undesirable location, they're not likely to siphon off meaningful traffic. "If [a consumer is] on your site, on a product-detail page, there's a reason for them to be there," she said.
Mike Gatti, exec director at the Retail Advertising and Marketing Association, compares the idea to a mall. "Sure there's a risk, but the way they look at it, there's a risk anyway," he said. "There's a risk if [customers are] walking through a mall. I don't think trying to trap customers on websites is a way to succeed."