2016 E-Commerce Benchmark Report Driving Holiday Success

Introduction You know that feeling you get when you carefully and painstakingly wind the lights around your Christmas tree, only to plug it in and short circuit an entire light strand? The frustration. The exasperation. Had you only taken a minute to test the bulbs beforehand - you could’ve avoided a huge headache. You unwind the lights and replace them. A glass of wine makes this do-over more manageable. But there are no do-overs for holiday advertising. If you painstakingly plan your holiday ad spend without embracing diversification, you risk short circuiting your revenue. The frustration. The exasperation. Had you taken the time to strategize both wide and deep into your digital ad channels, you could’ve generated more revenue during the most important time of year. We polled global e-retailers to find out how they plan to spend their advertising budgets this coming holiday season, and discovered a common theme: Findings showed that diversifying across channels, and among ad types within those channels, is a critical approach for e-commerce advertisers this year. And while there were obvious front runners for ad investments at the channel level—Facebook, Google—results showed that advertisers are taking a more pragmatic approach toward their spend within those channels. Rather than loading up on one ad type, e-commerce companies will be spreading the wealth, and ensuring their products are well represented across various ad types. Read on for a complete look into the advertising plans of your global e-commerce peers as we head into Q4. 2 | 2016 E-Commerce Benchmark Report | © 2016 Kenshoo Ltd.

Overall Findings

TRADITIONAL VS. DIGITAL AD SPEND Question: To the best of your knowledge, what % of your ad budget will be allocated to digital advertising (Display, Search, Social, Email, etc.), vs. traditional advertising (TV, Radio, Print, Out-of-home) during the holidays?

we’re focusing just on their Facebook and Google spend to represent search and social, as they are the largest beneficiaries of their category’s budgets. SEARCH VS. SOCIAL SPEND 80%

On average, the companies surveyed allocated 62% of their holiday marketing budget to digital over traditional marketing. Some companies went even further, with more than one third saying they focused 75% or more of their budget in digital advertising. But the size of the company made a difference, with smaller companies allocating a greater amount of their budget to digital instead of traditional ads. Ease of execution and improved tracking abilities are likely what drives smaller companies to adopt digital methods. ALLOCATED >75% TO DIGITAL VS. TRADITIONAL

60% 40%

20%

Companies with < 100 employees

Companies with < 101-499 employees

Companies with < 500 employees

1 Facebook 1 Google

WHEN DOES HOLIDAY SEASON BEGIN? In one of the most hotly contested issues outside of the 2016 Presidential Election, the question of when the holiday season begins plagues many. According to the retailers surveyed, here is the breakdown of when they consider the start of the official holiday season. And though the majority view November 1st as the start of the holidays, more than a quarter surveyed felt the holiday season began in October.

60%

45%

30%

15%

WHEN DOES THE HOLIDAY SEASON START Companies with < 100 employees

Companies with < 101-499 employees

Companies with < 500 employees

14%

SEARCH VS. SOCIAL SPEND Question: Do you have separate budgets for paid search and paid social? While most of the companies (82%) have separate budgets for search vs. social marketing, the amount allocated varied based on the size of the companies. For ease of understanding,

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26%

13%

47%

1 October 1 1 November 1 1 Thanksgiving/Black Friday 1 Other

You know that coworker that starts to listen to holiday tunes way before you’re ready? They might be onto something.

WHEN DO YOU BEGIN TO PLAN FOR THE HOLIDAYS? Question: When will your business start planning marketing programs for the 2016 holiday season? Over half of the companies surveyed start holiday planning by the end of August. The bigger the company, the earlier they plan. Only 19% of companies with 100 or fewer employees begin their holiday planning in July or earlier, yet a whopping 54% of companies with 500 or more employees do. BEGIN HOLIDAY PLANNING IN JULY OR EARLIER

said that Search Keyword ads were very important to their holiday marketing, and Product Listing Ads (PLAs) cited as important for 61% of respondents. Since search is intent-driven and what the consumer is looking for is clearly expressed, search will continue to be extremely important to any marketing plan. But after these ad types, no clear preference for others emerge from our findings, indicating that there’s a general sense of equal importance amongst the remaining ad options, including link ads/page post ads, videos, lead gen ad units, and mobile app-related ads.

IMPORTANCE OF THESE OVERALL FINDINGS If you’re early, you’re on time. If you’re on time, you’re late. We’ve all had a teacher, coach, or boss who felt this way. Advertisers feel the same about their advertising calendar.

60%

45%

30%

15%

Companies with < 100 employees

Companies with < 101-499 employees

Companies with < 500 employees

WHICH AD TYPES ARE IMPORTANT FOR HOLIDAY MARKETING PROGRAMS? Question: How important is the following ad type to your holiday program? The two most important ad types for the holiday marketing programs give their nod to Google: 74% of those surveyed

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The sooner you start, the more you get out of your holiday marketing. It’s important for you and your team to get into the holiday mood as early as possible, build in enough time to plan towards your goals, and execute as soon as consumers are ready to start shopping. As we continue to discuss in this report, making sure you carefully plan and integrate your cross-channel marketing with various ad formats that best showcase your products gives you the best foundation to have a successful holiday season. The rest of the major findings from our survey suggest that while both search and social are individually important, to get the most out of both channels you need to make sure that your holiday marketing is in sync between both. Additionally, you also need to make sure you are utilizing the most optimized ad formats available on each platform to get the full ROI for your holiday ad spend.

Social

FACEBOOK

INSTAGRAM

In not so surprising news, Facebook owns the majority of the ad budgets for companies surveyed. Almost half of all marketing budgets are dedicated to this platform, with 71% saying that this spend is up from last year. Many theorize that this increase in due in part to a trend of more consumers moving online for their holiday shopping.

Though it doesn’t make up a major part of the social ad budget (around 10%), Instagram is still seen as the next place for companies to increase their social spend.

There’s no definitive answer as to why spending on Facebook varies the way it does between different sized companies, but there are some theories.

Instagram only opened it’s API in 2016, and it takes time to determine the right formula for successfully integrating new campaigns into a brand’s marketing mix. With that said marketers are figuring it out and increasing budgets as a result. We anticipate a greater emphasis on placement optimization, leveraging Instagram and Facebook together to target

One such theory, from Hunter Jones, Ad Optimization Specialist at OrionCKB, is two-fold: Smaller companies likely don’t have the budget for large amounts of advertising. Therefore they realize the value in direct targeting on Facebook, and likely spend on the “most accessible” platform for companies of their size that can get them closer to their customers. The larger companies likely have larger budgets, with more sophisticated means to attribute sales back to Facebook. The second part of her theory suggests mid-sized companies are either in the process of scaling or trying to diversify spend across channels as they grow in order test what works best. Ad budgets dedicated to Facebook also vary widely if a company has an in-house marketing team, utilizes an agency or consultancy, or a combination of both. When handling social ads in-house, 36% of the company’s social ad budget is devoted to Facebook. But when a company uses an agency, consultancy, or both—the portion of their social ad budget for Facebook rises to over 50%.

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On average, over half of the companies surveyed said their Instagram spend is greater this year over last year.

TWITTER Empty nest syndrome isn’t just what parents of college aged children are feeling, it also describes the spending on The Bird for this year’s holiday marketing. Across the board, Twitter spend is trending downwards. Out of all of the social networks listed within the survey, only Twitter saw a large number of companies saying their budget allocation decreased YoY. Almost a quarter of all companies surveyed said they will spend less on Twitter this year, and the majority of others said their spending will remain unchanged.

Search

GOOGLE Google gets the majority of the money when we look at spend on search. Within search budgets, Google takes up 68% of the spend, and 62% of companies said this is an increase over last year. That average company spend can be a bit misleading though, as it’s really only increasing for small and mid-sized companies. Of the large companies surveyed, only 9% said they are increasing their YoY spend on Google. Whether or not a company has an in-house marketing team also makes a difference in whether a company increased their spend on Google. Almost 75% said their Google spend was higher YoY, but only around half of companies that outsourced said the same. While we found it surprising that 90% of companies said that Search Keywords are more important to their holiday marketing this year over last, others were less surprised. Rob Johnson, Ad Optimization Specialist for OrionCKB, saw this as a result of the fact that Google is moving to a standard larger ad (with the final rollout coming in October). These “Expanded Text Ads” as Google calls them, allows for 50% more space, 2x as many headlines and almost 3x more characters than before. Johnson explains that now “companies can cover more keywords in their ad copy, which makes it relevant to a larger amount of search terms.”

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Video and Mobile

VIDEO Whether it’s budget constraints or the belief that videos must be extremely fancy and high-tech, it appears only the largest companies realize the importance of video ads. A whopping 76% of large companies rated video as very important to their holiday marketing program. Yet only 26% of small companies and 24% of mid-sized companies said the same. Many of these mid-sized and smaller companies may think that budget and production quality is what is holding them back from adding video ads to their repertoire. However, video ads do not have to be in-depth or high-level productions. They can be as simple as rotating images or GIFs. Facebook’s Slideshow feature takes this into consideration and is a valid option for those with video resource constraints. According to Facebook, the average viewer watches over 30 seconds of a video, and it takes just 30 seconds of video viewing to achieve up to 40% lift in ad recall. Integrating video campaigns should be an important piece of all marketers’ holiday season strategies regardless of company size.

MOBILE According to eMarketer, US retail e-commerce sales will grow by 17.2% in 2016, with mobile e-commerce driving the majority of the growth. However, more than half of marketers surveyed said mobile app install ads and mobile app engagement ads were less important to their strategy for 2016. It’s not a secret that e-commerce companies are still working hard to develop the best possible mobile app experience for their customers. It could be that they’re not willing to invest advertising in assets that are still in development, and know that a superior web check-out experience is the more efficient way to spend their budget.

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Conclusion These numbers show how despite spending more on social this year, brands rank Search Keyword as the most important piece of their holiday marketing campaigns. The term cross-channel marketing gets thrown around a lot, but it is the true definition of what companies should do with their holiday ad spend. In simplistic terms, social drives discovery of brands and companies, which leads to intent and search, which can ultimately lead to conversions. Finding the best creative and most efficient ad formats also creates buzz and funnels back into driving customers to your brand. So don’t just focus on one area when tackling your 2016 Holiday Marketing plans; make sure all of those light bulbs stay lit so your tree will be the brightest on the block.

Methodology The data analyzed in this report was collected from 140 Kenshoo and OrionCKB clients and prospects (advertisers and agencies) managing paid search and social programs for the retail vertical spanning major retail categories such as electronics, books, apparel, appliances, shoes, sporting goods, pet items, and more.. All year-overyear (YoY) comparisons are from the retailers themselves and their own assessment of their holiday marketing budgets from 2015 and for 2016. This index includes all Responses were gathered via survey in July and August 2016, and respondents were given a small incentive for their answers.

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About Kenshoo Kenshoo is the global leader in agile marketing. Brands, agencies and developers use the Kenshoo Infinity Suite to direct nearly $350 billion in annualized client sales revenue through social, search, mobile, and display advertising. Kenshoo provides leading native API solutions for ads across Facebook, FBX, Instagram, Pinterest, Twitter, Google, Yahoo, Yahoo Gemini, Yahoo Japan, Bing, Yandex and Baidu. Kenshoo powers digital marketing campaigns in more than 190 countries for nearly half of the Fortune 50 and all 10 top global ad agency networks

About OrionCKB OrionCKB helps e-commerce and lead gen advertisers drive real, profitable growth from their customer acquisition and retention efforts. With an exclusive focus on direct response advertising, OrionCKB provides strategy & optimization that maximize ROI and increases revenue from Facebook, Instagram, Twitter, PPC and mobile advertising. Clients include Hallmark, Zipcar, Thumbtack, Publisher’s Clearing House, Bombas, and KiwiCrate. For more information, visit www.orionckb.com.