Mary Meeker’s renowned annual Internet Trends decks have been providing industry insights (and watercooler conversations amongst us data heads) since 1995. This year the Bond Capital founder released a staggering 333 slides, with a wealth of data around ecommerce and retail in general — including hints of possible market saturation and slowing growth.
What caught my attention in the 2019 report was the corresponding rise in audience acquisition and online advertising spend. This rising reliance on paid audience generation has some major blind spots that are potentially detrimental to the efficiency and yield of huge percentages of marketing budgets.
I’m going to highlight the trends in the report that jumped out at me, alongside some exclusive findings from Monetate’s own data science team, in order to demonstrate the importance of a customer acquisition strategy that marries the prioritization of onsite experiences with targeted advertising growth.
Ecommerce sales are up but growth is slowing
The trend numbers on U.S. ecommerce validate the feelings of a lot of leading retailers out there. While total year-over-year sales are increasing (12.4 percent in 2019), the growth rate has fallen sharply in recent years (17 percent in Q4 2017).
Likewise, it’s no surprise to retailers that although ecommerce continues to grow year-over-year in the double digits, physical retail is moving at a snail’s pace. This places huge importance on growing the ecommerce segment, but there’s a risk (as I’ll dive into next) in focusing primarily on audience acquisition budget growth to do this.
To put this in more context, a 2 percent increase on a nearly $800 billion retail industry (excluding food service, motor vehicles, auto parts, gas stations and fuel) represents a slightly lower total dollar value than 12.4 percent of the nearly $140 billion ecommerce industry. It would be very impactful on the industry if the five-percentage-point-decline trend continued in ecommerce growth.
Increased audience acquisition spending with diminishing returns
It should come as no surprise, then, that one area enjoying enormous growth is online advertising spend. Meeker’s report cites phenomenal 22 percent YoY growth in digital advertising spend for 2019, following 21 percent growth in 2018, with significant increases in mobile allocation also.
While Google and Facebook have a clear lead here, other platforms like Twitter, Pinterest, and Snapchat are also growing quickly. Much of this is due to the intelligence of online advertising channels; each channel brings with it highly targeted machine learning strategies all designed to optimize for conversion.
However, this channel sophistication corresponds with increased competition as sectors mature their digital strategies. Combine this with increasing advertising costs, and you end up with a higher cost-per-acquisition that isn’t fixable through copy and CTA optimization.
Shifting marketers’ focus from volume to experience
At first, this data appears to paint a bleak picture for retail and ecommerce: a saturated market where the cost of bringing in new audiences is growing while overall growth is slowing. However, there is a huge opportunity for savvy marketers to focus on designing (and measuring) owned property experiences that improve acquisition cost metrics. And I mean going beyond the table stakes of testing and segmenting paid inbound audiences.
Where’s my proof? Monetate recently analyzed over a million sessions across hundreds of ecommerce brands and found that a series of consistent, pervasive personalized experiences can improve the efficacy of increasingly expensive acquisition channels.
The data showed that when visitors were served not just an optimized experience upon landing on site, but a continued series of personalized experiences over their additional pageviews, then there was a dramatic improvement in conversion rate.
In fact, just three personalized pageviews increased the conversion rate compared to a single pageview by 100 percent. And add-to-cart rates increased by 74 percent.
The findings get even more dramatic as the volume of pageviews increases. Moving to 10 personalized pageviews increased conversion by a staggering 1,859 percent compared to a single personalized pageview.
Of course, we wanted to make sure this was a direct result of the personalization and not simply because visitors’ conversions grow naturally as their pageviews increase. With a control example of non-personalized pageviews, we saw that while conversion rate does grow over time, it is very different growth from the personalized experiences:
Increasing yield from paid channels
This data becomes even more valuable when we looked at the impact a series of personalized sessions had on referral channels. And Facebook referral data gave us a really compelling case for strategic personalization.
In our data set, Facebook was the lowest performer at a 1 percent conversion rate compared to an overall average of 1.7 percent. Our data then showed a “tipping point” where a series of personalized pages after a Facebook referral led to dramatic changes: on average between the 7th and 8th personalized pageviews, conversion rates were 5X better and Facebook went from being the lowest performing channel in the set to the highest.
This tells us is that there is not only a massive opportunity to grow the yield of acquisition channels through sustained personalization, but also what could initially be thought of as a low-performing channel may in fact simply be an unoptimized top-performer.
Key takeaways for marketers in ecommerce and retail
If the trends in Mary Meeker’s 2019 report continue, there are signs that ecommerce growth may be beginning to stagnate — through market saturation, increased competition, and/or economic reasons. And with huge pressure to make up physical retail losses in the ecommerce space, marketers are naturally going to be hyper-focused on customer acquisition and digital advertising spend.
The huge opportunity area is in leveraging holistic, comprehensive personalization to increase paid channel yield at a far higher rate than simply (or primarily) upping the amount of dollars being spent on acquisition. Marketers should be personalizing beyond key site pages and thinking of personalization as a pervasive, consistent strategy that increases value.
Liam Moroney is the Sr. Director of Growth Marketing at Monetate.