Over 90% Of Brands Are Raising Prices, Record Q4 Spending, and Everyone Loves a Good Promotion

In a world full of constantly changing technology and information, this monthly newsletter keeps marketers up-to-date on the latest trends that will impact their business. I hope you enjoy it!

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Recently, there has been a lot of talk about advertisers pulling back spending as much as?50%?because of supply chain issues and iOS14.??If this were true, it would be a significant reversal to the trends we saw over the last year with massive growth across the board for digital spending. However, the truth is a little less headline-grabbing. Some marketers are pulling back on spending because of supply issues since it does not make sense to drive demand if you don't have inventory to sell. According to Adobe, there has been a?325%?increase in out-of-stock messages compared with October 2019. However, reduced spending does not appear to be the broader trend. Most all of our favorite platforms have been?reporting?ad-revenue growth.??NRF?is also predicting an increase from $843.4 billion to $859 billion in holiday sales this year. Finally,?eMarketer?recently released that the US holiday retail sales will see the most substantial growth in the past 20 years, increasing 9% from last year. That could be a function of many things, including pent-up demand and increased savings. So while there are some supply chain issues, companies are spending to capture this consumer demand. Especially if you have competitors pulling back on spending, it's an opportunity to introduce your brand to new customers, steal market share from a category leader experiencing inventory issues, and sell into digital products/gift cards. Supply chain issues are happening, and that's a fact; however, it hasn't slowed down spending for the broader group of advertisers but perhaps pivoted on how and what items they are promoting. For iOS14 challenges, I'm seeing more brands rethink in-platform attribution as not the live or die metric it once was.??

So let's dive into some of the major platforms and see where they are standing.???Amazon?slightly surprised us all with profits and sales that came in below expectations.??While sales and overall profits had decreased, Andy Jassy, the Amazon CEO,?said, "We've always said that when confronted with the choice between optimizing for short-term profits versus what's best for customers over the long term, we will choose the latter." Amazon is right; they have been consistently committed to the consumer experience to gain more shopping market share that will pay off in merchant and consumer loyalty. They are also facing the same issues as the rest of the world, including labor shortages, increased wages, global supply chain issues, and a world open to in-store shopping. However, there were many bright spots in the Amazon Q4 numbers, including Amazon Ads, representing most of the revenue classified as "other," which rose 49% YoY. So despite some of the issues around softening online sales and supply chain, it appears that brands are still happy to shift media dollars to Amazon. According to?CNBC, this is the first time in Amazon's history that revenue from services outpaced that of retail sales. The growth of advertising is not a trend that will reverse anytime soon - Amazon is only getting more competitive from an ad standpoint with more advertisers spending and average CPC's increasing. Amazon recently held its unboxed event where it spoke about?new tools and ad products?that will only heighten the demand for its ad solutions. Specifically, they appear to be focusing on closing the measurement gap with their audio/video offering and adding new measurement metrics, including brand lift. Amazon also understands we are moving to an omnichannel world and can't expect the same type of digital sales growth moving foward. They are pushing their?brick-and-mortar?ambitions to better compete with Walmart and capitalize on the new omnichannel shopping behavior we can all expect to see forward.??

While Amazon continues to grow out its brick-and-mortar stores to capitalize on the omnichannel future, Walmart is set up well here with its significant store presence and a large share of online grocery. However, they still significantly lag behind Amazon when it comes to digital. In one of many efforts to change, they have recently opened up their marketplace to international sellers.?They have added around 5,000 sellers from China, many of which are the same sellers banned from Amazon for?review manipulation. Walmart marketplace?surpassed 100,000 sellers in July?and has since reached nearly 120,000 sellers - doubling in size in a year. At the current rate, by the end of 2022, it will reach 200,000 sellers. When Amazon suspended many of these same sellers, it was estimated that they were giving up around?1 billion?in sales. The issue is that Amazon does not turn away revenue for anything - they made a conscious effort to clean up their seller base, getting rid of counterfeit sellers and sellers who were breaking rules that could hinder consumer trust. For Walmart, they may want to grow but, if they face similar issues Amazon did, it could impair the trust consumers have in their marketplace. Despite an increase in merchants, Walmart's problem is that it does not have the same consumer adoption or advertiser solutions for sellers to promote their products. So while getting more merchants is a step in the right direction to build out its digital presence, it's just not enough.??

While Amazon has focused on becoming synonymous with online shopping for all, it appears that it is still a heavier favorite for higher-income households.?A recent Amazon Shopper Consumer Survey conducted by Clevland Research reported that high-income Amazon shoppers use the platform way more than their lower and middle-income counterparts. On average, the high-income shoppers report making 57% of their purchases online, and 74% of those online purchases are made with Amazon. That makes up about 42% of overall purchases done on Amazon compared to around 20% for low and middle-income shoppers. For brands that cater to higher-income customers, it shows just how vital a presence on Amazon is as those individuals have adopted both digital shopping and Amazon shopping at a much higher rate. The other interesting takeaway from that study found that despite Amazon investing in different ad placements to encourage product discovery and build out a more full-funnel solution for advertisers, most people still only use the search function. Despite all of the new ad units and placements that Amazon has developed to introduce new products to shoppers, we are still very reliant on search. It just shows that while Amazon is making moves to become a full-funnel shopping destination, it is still very much so an intent-driven platform. To me, this also showcases how vital organic rankings and a strong paid strategy are. If most people are still starting their buying and product discovery journey on search, you will come up short if you don't have a solid keyword-based strategy. The other interesting part is high-income shoppers did report shopping in a wider variety of ways (although they still predominantly used search), including:?

• Using brand store pages (41% reported using)
• Exploring what is trending (37%?reported using)?
• Making a shopping list in Amazon (37% reported using)
• Filtering by department (33% reported using)
• Following a link from a social media influencer (33% reporting using)

So while search is still king on Amazon, more higher-income consumers are going to Amazon for discovery vs. a specific brand or product in mind. If you are a seller with a higher income consumer base, it makes sense to explore some of the non-search placements for Amazon, including their DSP, influencers, and building a robust brand store. But don't prioritize that before you have your organic and search ads in check.??

While Amazon was the innovator in the DSP space, other companies have started following suit. Walmart partnered with the Trade Desk recently to launch their DSP in time for the holidays. Kroger is now launching a private programmatic marketplace so that brands can reach their shoppers on the open web using Kroger's first-party data. The difference between Kroger and the other programmatic offerings is that Kroger allows brands to use whichever DSP they choose versus being tied to one to activate Kroger's first-party data. With the eventual removal of third-party cookies, all companies are looking to beef up their access to first-party data. However, most CPG companies don't have access to first-party data because few sell much DTC making Kroger's first-party data extremely valuable for CPG's.?

Facebook?appears that it's finally feeling the effects of iOS14 - missing their Q3 forecasts. While that sounds concerning, the actual numbers are not that bad.??Facebook saw revenue from advertising grow 33% YoY, which is substantial. Instagram will make up over 50% of Facebook's ad revenues for the first time, driven mainly by Instagram stories. I expect this trend to continue as Facebook has lost some appeal, especially with a younger demographic. Instagram, despite some of its recent negative press, remains in favor with younger generations. In a recent report called?"Taking Stock With Teens"?Instagram was listed as the most widely used social platform. Facebook said that growth in ad revenue was driven by a 47% increase in YoY ad prices and a slight increase in the number of ads delivered. While Facebook is not dead, they see the challenges brought on by the iOS14 update and say they are working to rebuild their targeting and optimization systems, a multi-year effort. Just recently, Facebook said it estimates its under-reporting conversions by around?15%?because of the iOS14 update. The multi-year effort comment from Facebook means for advertisers is that we can not expect Facebook to come up with a quick fix to solve all of our problems. While Facebook is facing some issues, advertisers are not going anywhere - eMarketer?projects?that Facebook will account for 24% of all digital ad spend by the end of this year. In the meantime, we will need to rethink our attribution, targeting, and media mix. Moving forward, Facebook appears to be heavily focused on its TikTok competitor Reels and eCommerce to make up for the potential advertising slow down.??

Pinterest?reported better than expected revenue numbers with YoY growth around 43% in Q3 despite a decline in monthly users falling around 2%. The company reported substantial revenue and profit numbers despite the decrease in its userbase by generating more money from each user. Pinterest has made some real moves with its ad product and has doubled down on making itself a high intent and shoppable platform, which gets more share of dollars from advertisers. While the revenue growth is impressive, they can't sustain this type of growth while losing their userbase. They are making more inroads with creators, which they hope will help grow some of those user metrics by adding features to empower creators to use Pinterest to engage with their communities and pay them for their content. One of those creator initiatives is?PinterestTV. PinterestTV will be a series of live, original, and shoppable episodes within the Pinterest App made by creators. Creators will be able to tag products that people can then click on for more information and purchase. The launch of PinterstTV is their way of more heavily investing in live shopping and gives users a new way to be inspired outside of browsing images. While they are a bit late to this party, I'm glad they have eventually gotten here, as live shopping on Pinterest seems like a no-brainer considering their platform is all about inspiration and discovery. Live shopping is just the next iteration of it.??

Before we move on from social media, the other stat I recently saw was that 3 out of 5 consumers said discounts influence them to buy a product through social media ads - more so than brand trustworthiness and eye-catching creative according to?eMarketer.??This is not to say that brand trustworthiness and engaging creative aren't important - they are, and we are seeing more consumers opt to shop with brands they trust. We are also seeing more shoppers favoring authentic and UGC creative. However, you have something compelling if you add discounts to the mix, especially around the holidays. Shoppers being influenced by deals is not surprising; however, with some supply chain issues, many brands are re-considering the discounts they are offering even during Q4. This could be an opportunity to steal market share and increase net new customers this holiday season if you can also offer discounts for first-time buyers.??

While many tech companies had less than stellar results because of iOS14 and a more omnichannel (not just digital-only), shopper?Alphabet?announced its highest quarterly increase in over a decade, with revenue growing by 41%. YouTube has constantly been a bright spot over the last year for Google, up 43%. To continue their growth, they have been focusing more on shoppable live streams. Starting Nov. 15, YouTube will host a YouTube Holiday Stream and Shop as they hope to grow in the live stream space.??Shorts?are another area of growth for YouTube, with the average number of first-time daily creators more than doubling in Q3. Overall, Google has done a great job at straddling the line between e-commerce digital-first buying and supporting advertising for people researching local businesses or looking for BOPIS. Google has said that searches for "open now near me" are up 4X vs. last year, showing that local shopping, in-store buying, and BOPIOS are alive and well. Advertisers are seeing this, too, with the number of advertisers using in-store sales goals plus eCommerce goals doubling YoY. While Google has made real in-roads in allowing omnichannel customers to shop locally, they are still doubling down digital. One recent update is their new?deals feed?that will appear in the shopping tab to highlight and support advertiser promos.

In other Google news, they are?cutting?in half the fee it charges developers that sell digital subscriptions through its Google Play app store, as both Google and Apple face regulatory and legal pressure over their app store rules. The fee will be 15% starting Jan. 1.??While it's not immediate, it should give brands some breathing room on their CPA and CAC goals.?

According to?CNBC, US consumer prices have increased 6.2% in October, the most significant inflation surge in more than 30 years.??While no one can say if this is temporary because of the supply shortages or a long-term issue, brands have started increasing prices on goods and services. According to Cleavland Research, 93% of brands are going to Amazon with price increases in 2021. The average price increase on Amazon comes to average out to around 5.5-6.5%. We may also see brands cut down on promotions, discounts, and coupons to not raise prices at all. While this is not easy for any brand, try to be authentic in why this is happening if you have to increase costs. Talk about the reason for the price increase, and if possible, link it back to a brand value narrative which can go a long way with consumers, especially GenZ and Millennials. Consumer goods are not the only thing being affected. A new?report?by ECI Media Management said that global ad prices would climb 4.0% this year - up an entire point from the 3.0% rate of media, ad-price inflation projected they released its last outlook in April. If you work in digital, increasing ad prices is something you have been dealing with all year, but as we look into 2022, it appears this will be a trend that continues.??

Finally, in somewhat personal news, my husband and I are expecting the arrival of our first child on Thanksgiving day. We are beyond excited about this happy addition to our lives, but what that means is for the next few months, I will be focusing my energy on my growing family, and I won't be able to release my Monthly Marketing Memo. I'll be back in the spring, excited to catch up on all that I missed.??

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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.??