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UK online retailers missing out on £1bn in advertising revenues

UK online retailers could be missing out on an estimated £1 billion worth of advertising revenues by choosing not to sell advertising space on their own websites.

GENERAL MERCHANDISE

UK online retailers missing out on £1bn in advertising revenues

The Creating Value from Every Visit report by OC&C Strategy Consultants has revealed that only two of the top 10 retailers in the UK choose to sell media space to third parties on their websites compared to eight of the top 10 retailers in the US.

Despite British online retailers being among some of the most visited websites by consumers, OC&C found that digital media revenues from selling search, display and trade advertising amounted to less than £150 million for UK retail websites over the past year. By comparison, news websites made approximately £400 million in digital media revenues, despite receiving only 3 billion page views.

Anita Balchandani, partner at OC&C, said: “Although the UK is one of the most advanced online retail markets in the world, British retailers are behind the curve when it comes to monetising shoppers as well as browsers on their website.

“This has been the case for a number of reasons. Firstly, e-retailers have been concerned that advertising on their websites could potentially deflect consumers away from their site. They have also been worried by the effects that promotional messages on their website may have on consumer perceptions of their brand. Finally, retailers have also expressed some operational concerns around internal accountability structures – for many retailers it is not clear who in the organisation would own this revenue stream.”

OC&C’s research found that the presence of adverts on a retailer’s website had very little impact on consumers’ purchasing decisions. Only 3% of consumers referenced having no sponsored links as an important purchasing factor, ranking well behind value for money (56%), quality of products (43%) and free delivery (33%.)

Cliff Hinrichs, head of ecommerce partnerships at Google, said: "Ecommerce sites haven’t traditionally captured any value from ‘browsers’ – the 95% of users who visit an e-retailer but don’t buy anything. In addition, the remaining 3-5% of ‘shoppers’ are most interested in low prices. Capturing value from "browsers" to subsidise lower prices is already an established strategy among some internet ‘pure play’ retailers.”

Balchandani continued: “Digital advertising is a huge untapped source of revenues for e-retailers. This is a natural continuation of practices, such as supplier funding, that are common in bricks and mortar retail, as well as mechanisms such as product recommendations that are commonly deployed online.

“However, there is no one-size-fits-all solution for all everyone. There are a number of options available, ranging from less intrusive solution that redirect a retailer’s traffic to other areas of their websites, to more profit-led implementations that are typically funded by third parties and lead traffic offsite.”

 

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