The Death of Paid Ads: Why Traditional Advertising Channels Are Becoming Obsolete.

IntroductionTwo of the leading metrics to assess the health of an ecommerce business are AOV and CAC. In July 2023, big brands are reporting a 51% increase in CAC since July 2021. At the same time only an 11% in AOV during the same comparison period. Some industries like Food&Beverage are getting hit even harder!

In the ever-evolving world of ecommerce, change is the only constant. As marketers, we've been riding the wave of digital advertising, from the golden age of banner ads to the reign of Facebook's targeted campaigns.

The once unshakeable fortress of paid ads are showing cracks. The introduction of iOS 14 and its privacy-centric policies have thrown a wrench into the well-oiled machinery of ad targeting, leaving marketers grappling with high Customer Acquisition Costs (CAC) and dwindling marketing efficiency rations (MER).

But what if we told you this isn't a catastrophe, but an opportunity? A chance to break free from the shackles of traditional advertising and explore the vast, untapped wilderness of alternative marketing strategies. This is not a call to abandon ship, but to adjust the sails and set course for uncharted waters.

In this article, we'll delve into the reasons why the golden era of paid ads might be fading and why it's high time ecommerce brands reconsider their marketing strategies. We'll explore the rise of ad blindness, the impact of ad-blocking technologies, and the increasing costs that are chipping away at your returns.

We will also explore alternate marketing solutions that are not just efficient, but also sustainable and more profitable. So, buckle up and get ready for a journey of discovery, innovation, and growth.

Shift in Consumer Behavior

A. The Evolving Consumer Behavior and Increased Ad Aversion

The digital landscape is changing, and with it, so are the habits of consumers. Today's consumers are more savvy, more discerning, and more resistant to traditional advertising methods. They crave authenticity, relevance, and value in their interactions with brands. This shift in consumer behavior is a significant factor in the declining effectiveness of paid ads.

B. The Rise of Ad-Blocking Usage

According to a report by Statista, in 2019, approximately 25.8 percent of internet users were blocking advertising on their connected devices. This figure is expected to continue growing, which loosely translates to a quarter of paid advertising messages never reaching their audiences. This rise in ad-blocking usage is a clear indication of the growing ad aversion among consumers.

C. The Diminishing Effectiveness of Traditional Display and Banner Ads

With the increasing use of ad-blockers, traditional display and banner ads are losing their effectiveness. Consumers are becoming more adept at ignoring these ads, leading to a phenomenon known as "banner blindness". This means that even when ads are viewed, they are often ignored, leading to lower click-through rates and conversions.

In the face of these challenges, ecommerce marketers need to rethink their strategies and explore alternative channels and methods to reach their target audience. The next sections will delve into these issues in more detail and present potential solutions.

U.S. ad blocking reach 2021 | Statista

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The Reality of Ad Blindness and Banner Fatigue

In the digital age, consumers are bombarded with a plethora of advertisements daily. This constant exposure has led to a phenomenon known as 'ad blindness' or 'banner fatigue'. This is when users consciously or subconsciously ignore banner-like information, which can be a significant hurdle for businesses trying to capture attention and convert users through online ads.

Case Study 1: The Declining CTRs

According to a study by Smart Insights, the average click-through rate (CTR) for display ads across all formats and placements is a mere 0.05%. This means that out of 10,000 impressions, only about 5 result in clicks. This low CTR is a clear indicator of ad blindness.

Case Study 2: The Impact of Ad Placement and Format

The same study also revealed that ad placement and format significantly affect CTR. Traditional full-banner ads performed poorly compared to skyscrapers and medium or large rectangle formats. This suggests that innovative and non-traditional ad formats might be more effective in combating ad blindness.

Case Study 3: The Power of Social Media Ads

Social media platforms offer a beacon of hope in the fight against ad blindness. For instance, Facebook ads in the newsfeed have an average CTR of 1.11%, significantly higher than traditional display ads. However, even this is trending downwards, indicating that ad blindness is also becoming a problem on social media platforms.

Case Study 4: The Rise of Ad Blockers

Another factor contributing to the decline in CTRs is the rise of ad blockers. These tools allow users to block all types of ads, further reducing the chances of users seeing and clicking on ads. According to data from Google, only 44.9% of all ads are viewable, meaning that over half of all ads are never seen by users.

The data suggests that businesses need to rethink their advertising strategies, explore non-traditional ad formats, and leverage platforms with higher CTRs like social media. Moreover, with the rise of ad blockers, it's more crucial than ever to create ads that provide value and resonate with the target audience, making them less likely to be blocked or ignored.

The reality of Ad Fraud and Viewable Ad Issues

In the world of ecommerce marketing, there are two villains that have been causing quite a ruckus: ad fraud and ad view-ability issues. They're like the Joker and Harley Quinn of the digital advertising space, causing chaos and leaving a trail of wasted ad spend in their wake.

Ad fraud is the sneaky villain of the duo. It's a practice where fraudulent bots mimic human behavior to generate fake clicks and impressions. It's like a digital doppelgänger, fooling marketers into thinking they're reaching real customers. According to a report by Statista, ad fraud is projected to cause global losses of a whopping $44 billion by 2022. That's a lot of money that could have been spent on, say, a Batmobile (or several).

Then there's the issue of ad view-ability. This is where ads aren't properly seen by users, like a billboard in the desert. According to Google's "The Importance of Being Seen" study, only 56% of all display ad impressions are actually viewed. That's like throwing a party and having less than half the guests show up. Not exactly the ROI you were hoping for, right?

These issues are more than just a thorn in the side for ecommerce marketers. They're a full-blown crisis. They lead to inflated metrics, wasted ad spend, and a whole lot of frustration. It's like trying to fight crime with a water gun. You're just not equipped with the right tools.

Shifting Focus:Alternative Channels and Strategies

As ecommerce marketers, we're a bit like explorers. We're always on the hunt for the next big thing, the next untapped channel, the next game-changing strategy. But sometimes, the path less traveled isn't a path at all—it's a whole new landscape. And that's where we find ourselves today, standing at the edge of a vast expanse of alternative channels and strategies that promise to revolutionize the way we do ecommerce marketing.

Now, I know what you're thinking. "But I've got my email marketing down to a fine art! My social media game is on point!" And that's great. But let's face it, in the fast-paced world of digital marketing, relying solely on traditional channels is like bringing a knife to a gunfight. You're going to need more firepower.

So, let's take a look at some of these alternative channels and strategies, shall we? We've got influencer marketing, chatbots, SMS marketing, Partnership Marketing, Bundling, Loyalty Programs and others. Each one is like a shiny new tool in our marketing toolbox, ready to be used and abused.

Here’s an article deep diving into Facebook along with alternate channels. Click the link.

Conclusion

In the ever-evolving landscape of ecommerce marketing, it's clear that the old ways of doing things are being challenged. The rise of ad blindness, the increasing costs of paid ads, and the advent of ad-blocking technologies have all contributed to a seismic shift in how we approach marketing. But as we've explored, there are alternative strategies and channels waiting to be harnessed. From influencer marketing and chatbots to SMS marketing and content marketing, these tools offer new ways to reach and engage with our customers. And with platforms like Subkit, implementing these strategies has never been easier. So, let's embrace the change, challenge the status quo, and redefine what ecommerce marketing looks like. It's time to schedule a demo call with Subkit and step into the future of ecommerce marketing.