Lower Return for Prime Day, Netflix is for Gamers & Do Podcast Listeners Care About Ads?

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Prime Day has come and gone, and the results are mixed. Before 2020, Prime Day was expanding 50% or more every year.??However, this year, the?estimates by Adobe Analytics, Digital Commerce 360, and Morgan Stanley?say that Prime Day grew just 5-10% compared to last year's event. In addition, impressions only grew?32% in 2021 vs. 2020, while they increased by 74% last year. Amazon Prime Day is still growing, and the first day of Prime Day?drove the most online sales?during any one day so far this year. However, it does appear we are reaching an inflection point where we can no longer expect record-breaking growth from Prime Day moving forward.

Despite the positive sales numbers, one of the significant challenges for sellers was the increase in cost and competition this year compared to past years. According to?Feedvisor customer data, ad spend was up 93% during Prime Day 2021 compared to 2020. A significant jump from the 43% it was up last year. Despite the minimal growth of Amazon Prime Day, the almost 100% growth in ad spend shows just how necessary advertising on Amazon has become to stand out, especially during the hyper-competitive Prime Day. Because of the increased competition, sellers' returns fell by 18% compared to 2020. Not a surprise if you consider CPCs increased by 28% for Prime Day 2021 compared to 2020. These trends are not new or exclusive to Prime Day; Amazon has gotten more expensive with decreasing returns and increasing CPC's across the board - Prime Day only shines a spotlight on it.??

Considering the alignment during Q4 last year, it's no wonder that this Prime Day saw slower growth metrics. Despite more competition and cost, the sheer volume of interest and purchases coming from consumers still makes it worth it for brands even with reduced efficiency. I'm excited to see if Amazon announces a second Prime Day in Q4 this year, considering how well the Q4 one did last year. It could make sense to hold another Prime Day to boost Q4 sales numbers and get new Prime subscribers. Cleveland research recently reported that 33% of Prime members enrolled in membership in the 30 days leading up to Prime Day compared to 26% that enrolled leading up to the 2020 event. Of those recent members, 84% purchased on Prime Day compared to 56% of total Prime members. These results prove how Amazon effectively marketed its deals and the value of Prime to the non-Prime member base. Amazon has a one-track mind, and that track is increasing sales and Prime membership, so another Q4 Prime day could fit the bill.

As Amazon continues to reign supreme in eCommerce, they also continue to invest in their DSP, and it appears to be paying off. Cleveland Research reports that 75% of brands selling on Amazon are investing in Amazon DSP as part of their advertising strategy.??With increasing?CPC prices?for traditional Amazon ad units, brands are looking for other ways to reach consumers. Although that 75% number seems high, it is possible as Amazon has been pushing their DSP to sellers for some time now. There is a place and time for the Amazon DSP, and brands should not forget about the more standard ad units on Amazon as DSP costs will only continue to increase as spend set to increase by about 25% this year. I can see why Amazon keeps harping on it - it's a great offering. They have been rolling out new features and capabilities, including home page display ads and an overall increase in home page ad inventory, and the ability to buy Twitch audiences.?

Costs continue to increase on the Amazon platform and some brands have started sending off Amazon traffic to Amazon to drive sales growth. With the new A10 algorithm incentivizing brands who send traffic from off Amazon, it is an excellent way to generate immediate sales velocity and increase your rankings (which then generates more sales). To further incentivize brands to use this tactic, Amazon recently reduced the transaction fee to?5% from 15%?for sales originating from brands bringing the shopper to Amazon.??While many brands have gone this route, more of them are concerned about losing first-party data and losing margin that would occur if someone buys from Amazon vs. their site. Amazon is not doing this out of the kindness of their hearts but to incentivize brands to stop investing so heavily in their D2C sites and get more traffic to Amazon. However, the issue remains that building a brand, collecting first-party data, and owning that relationship are essential and something Amazon can't offer. At the same time, I can almost guarantee Amazon will have a higher conversion rate than any brand's D2C site, so it will be about balancing what each brand values most.???

?The last point I promise to make about Amazon in this newsletter is that they recently announced they would?acquire Art19,?the podcast hosting and monetization platform used by publishers including Wondery (which Amazon also bought) and NBCUniversal.??As Amazon continues to diversify the type of media it offers to advertisers (DSP, CTV, and now podcasts), Art19 is a thoughtful acquisition, especially if they can find a way to connect it to their massive treasure trove data. The other exciting piece is to see if Amazon can connect the dots between ads people hear and what they buy on Amazon - that type of tracking for podcasts would be exciting.??Expect to see more podcast and content acquisitions by Amazon as they continue to build this category to capitalize on the increased listenership and demand.?

As we all know, over the last year, podcasts blew up as people looked for additional ways to entertain themselves and take a break from their screen-heavy days. According to Nielsen, light podcast listeners (those who listen one to three times a month) make up nearly?half of podcast listeners.???In 2018, podcast listeners were evenly split between light, medium (listen four to nine times a month), and heavy listeners (listen ten or more times a month). Companies like Spotify, Facebook, and Amazon invested heavily in podcasting, so people who would otherwise be on these platforms for music or social interactions are being introduced and pushed to podcasts. Podcast companies are betting big that they will convert these light listeners into medium to heavy listeners, especially as people resume travel and commutes to offices as workplaces start to open back up. What that could mean is even more time spent with Podcasts. eMarketer?projects?that the average time spent with the digital audio medium will continue to increase through 2023 to 1 hour and 22 minutes per day.??

Despite the growth of podcasts, one concerning stat that stopped me in my tracks was that close to?34%?of U.S. adult podcast listeners almost always skip ads in the shows they regularly tune in to, and about 17% do so most of the time.??While podcasts have an excellent reputation, they still lack measurement and how their ads impact purchase behavior. If people spend more time with podcasts and money continues to flow their way, marketers won't tolerate a lackluster measurement solution. With some of the recent acquisitions and innovations in this space, I expect to see better measurement capabilities in the upcoming years.??

U.S. consumers are ready to spend all of those pandemic savings! Current reports show that shopping is now back to?pre-pandemic levels.??We know that digital shopping has been growing rapidly, with eCommerce set to grow by?18%?this year. However, survey results from Yotpo found that 53% of shoppers plan to do a mix of in-store and online shopping this year. Only 10% of consumers plan to shop mostly at physical stores, while 37% say they mostly shop online. People are going back to the store, but it's different now, and consumers who were in-store-only shoppers will now keep digital in the mix as they have gotten used to the ease and convenience. We also continue to see consumers browsing in-store but then buying online. No one knows how 2021 and beyond will shake up and the actual role of in-store, but it's clear that most consumers still value the physical store as part of their purchase journey.??

To pivot back to eCommerce, one thing that has helped the growth of eCommerce was the adoption of Buy Now Pay Later (BNPL) services, especially among younger generations. They have increased in usage significantly over the recent year, but I had no idea how much.??A recent report by eMarketer?says that more than 45 million people ages 14 and older in the U.S. will use BNPL services this year, up 81% over 2020, and the age range of BNPL users will widen over the coming years favoring GenZ.??By the end of 2022, 44% of Gen Z digital buyers ages 14 and older will have used BNPL services at least once that year, compared with only 37% of millennial digital buyers. Still, there remain some barriers to adoption among older consumers, so BNPL services are turning their attention to the older generations by partnering with a more diverse set of retailers. The study found that among U.S. adults who hadn't used BNPL services, around 20% said they don't understand them at all. Since each platform functions in a slightly different way, older consumers may become overwhelmed and hesitant to adopt. BNPL has had an enormous boom, but if they want to continue their growth, they will have to do a better job of demystifying the services and making them more widely available. If you have a product that caters to Gen Z, BNPL may become even more critical in the upcoming years.

Another trend that seems to be pushing eCommerce growth forward is social commerce. eMarketer recently predicted that in 2021 U.S. social commerce sales will rise by 35% to $36.62 billion, making up 4% of U.S. retail eCommerce. With expected growth for social commerce to make up 5% of U.S. retail eCommerce sales in 2024. Their forecast shows that Facebook is the number 1 social commerce platform in the U.S. In a recent survey by The Harris Poll, 38% of U.S. adults said they had watched a livestream of someone talking about a product they might want to buy. Still, just 7% said they ultimately purchased the product based on the presenter's recommendation. Livestream shopping is still in the early days, with early adopters latching on, but as additional platforms make it commonplace (Facebook), this number will continue to increase. It may not be top of mind for brands right now, but those that adopt it early will have a first-mover advantage that is hard to replace.??

The pandemic has changed consumer behavior forever, and one of the changes here to stay is that we are more impatient than ever. According to a new study from Software AG, consumers now want faster delivery and added convenience.??70% of consumers will now choose a retailer based solely on delivery speed (and we wonder why Amazon is doing so well). Moreover, 80% of shoppers who use a store's Buy Online, Pick-Up In-Store option (BOPIS) will continue to do so.

Another significant consumer behavior shift brought about by our reliance on online shopping is that we are not as brand loyal as we once were. I will say we can't just blame our digital and eCommerce focus - this has been a long time coming, with many brands (especially DTC brands) focusing on short-term trackable sales vs. long-term brand building.??Consumers now consider?50% more brands?during an online purchasing experience than they do during an offline one. The impact is that the consumer's original brand choice often gets bumped by an alternative when they are buying online. In general, this shows that consumers are getting less attached to brands as we have an abundance of choices, and it's easy to shift between brands online. Digital is a beautiful thing but our obsession with being, so direct response focused with little emphasis on anything that does not drive a direct conversion is to blame. If you only use digital tactics to drive revenue and not build a relationship with your customer or build a brand, this is for you. Especially if you are a commoditized brand, this should be a wake-up call. The other thing I think is interesting here is the competitive conquesting strategies brands should start considering. If consumers are so open to switching between brands, everyone should dive deeper into their competitive conquesting strategy. With our newly formed impatience - if you know you can deliver faster than your competition - that's a great call out and a real differentiator.??

New research?from the NPD Group finds that social media has a powerful impact on apparel sales.??When it comes to educating people about brands, Facebook comes first, chosen by 41% of respondents, followed by Instagram at 35%, and Pinterest at 21%. When these same consumers were asked which platform converted them into buyers. 51% say content on Facebook and Instagram resulted in buying products. We all know Facebook is the king of social conversions, but it's interesting to see Pinterest poll so high among awareness. For all the talk about how Facebook is losing steam, the thing is….it still works. There is a reason it's a must-have on media plans, and that's because it can drive awareness and purchase better than most. However, I think it's interesting to start seeing what platforms can drive awareness to ensure you have them in your media mix, even if you use Facebook to convert them later down the funnel.??

Recovery spending by brands is up pretty much across the board, and costs are rising, but two major spenders (Travel and Entertainment) are not up to full speed yet.??In the last two months, movie studios?spent around half?of what they spent in a comparable time pre-COVID. MoffettNathanson Research estimates box-office revenue (and spending to support it) won't be returning to near 2019 levels until the fourth quarter, making Q4 CPM's & CPC's all the more inflated for all brands trying to capture attention. Travel is the other big hold out on spending. While spending is increasing overall, it's still?down 58% in 2021?compared to 2019. This reduction in spending is despite most U.S. adults returning to their regular travel activity. U.S. adults' travel plans are returning to pre-pandemic levels. According to The New York Times, with 70% of the U.S. population estimated to be vaccinated by August 10, travel demand will continue to rise. As demand for travel increases, we may see that industry going back to business as usual.??

As the streaming wars continue,?Apple+ has expressed interest in the streaming rights for a package of NFL games the NFL is now auctioning.??Apple+ is trying to make themselves a must subscribe to as consumers are cutting down on the number of streaming services they watch. This comes on the heels of Amazon's news that they will be the exclusive provider of Thursday night football. Not surprisingly, in other streaming news,?U.S. subscriber growth at Disney+ slowed?in the past few months, with most of the growth coming from India and Latin America. Generally, as people are getting back out into the world, they need to be less reliant on the sheer number of streaming services they subscribed to in the past. It is fueling debate at Apple+ (and everywhere) if they should broaden their programming to appeal to a more diverse audience.

Speaking of diversification,?Bloomberg recently reported?that Netflix might make some significant investments into the gaming industry.???Just like Disney, Netflix has seen its subscriber base continue to slow down because of global lockdowns easing. Getting into video games is very smart by Netflix as all of the other streaming services are continuing to add new traditional content. Adding video games would truly differentiate Netflix and give them a continued edge. The other clever thing this does is make a more considerable investment into acquiring the Gen Z audience who has traditionally spent?more time with video games and less time with T.V.?than other generations.?

Finally, to end on some joyous news! Google announced that Chrome would postpone phasing out third-party cookies until 2023.??First of all - thank goodness - it did start to feel like marketers were ill-prepared for the 2022 deadline. However, this extension does not give us the OK to sit back and put our plans on hold. We are being given an extra year to prepare, so I suggest we all take this very seriously. If you want to check out a?15-minute webinar?on how to prepare for this cookieless 2023, this is a good one. Although I must admit, I am biased.

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Megan Conahan is a 16-year veteran of the digital marketing industry. Over the last 16 years, she’s consulted with fortune 1000 brands on how to best negotiate the ever-changing digital marketplace demands and create unique solutions to set them apart. Megan is an EVP at Direct Agents, an independent and minority-owned digital marketing agency.??