Why Sponsored Listings Will Be the Last Ad Standing

By Jason Pratt, General Manager, Koddi

I’ve been working in internet advertising since 1996, back when I helped a large software company launch its very first web banner ad campaigns. Back then, we thought “punch the monkey” was the pinnacle of interactivity within advertising. We couldn’t even imagine a future in which we’d have the ability to drive not only clicks but direct sales, at scale, through the proper placement of a simple piece of relevant, well-targeted creative.

As a longtime observer of the industry, I’ve seen a lot of ad types come and go. When certain tactics and formats vanish, it’s typically because of one reason: They no longer have a relevant place within the user experience. Based on this simple observation, I’ve come to believe that—when all is said and done—marketplace sponsored listings will reign supreme within digital advertising. Here’s why I expect them to outlast everything else.

The Decline of Search and Social

Of all digital channels created in the last two decades, only a few have proven to be both highly effective without interrupting the consumer experience: search, social and sponsored listings. While the first two still constitute tremendous spending within the market, they both have notable shortcomings that will limit their futures, and their cracks are showing more and more these days.

On the search front, we’re seeing more commercial traffic moving out of generic search engines and into marketplaces like Amazon, Expedia, and Uber Eats. This makes sense, as it gets users a step closer to their intended transactions, via engines that they trust. Consumers are becoming less and less willing to wade through the plethora of options surfaced by generic search engines, particularly when they crop up on sites they don’t know or trust. Ultimately, consumers want to search and transact directly through engines and specialized aggregators that they trust, and this desire will end the reign of the search ad as we know it today.

Meanwhile, social media advertising is going strong right now—but that’s only because it’s the next-biggest monolithic pool of inventory after Google. A number of forces are already in motion that will chip away at the usefulness and effectiveness of social ads in the coming years. Engagement on the biggest social platform, Facebook, has taken a hit recently due to natural shifts in demographics and user behavior, but also consumer frustration over the politicization of social platforms and their policies on hate speech and other sensitive issues. Facebook’s dominance as an advertising platform may be showing cracks and social media behaviors, in general, are trending toward more privacy-centric options (though I’m sure Facebook and its offshoots will continue to grow and earn money in other ways!) I realize that I’m making this call during a time of particular strength for Google and Facebook’s ad earnings, but I still see trouble on the horizon.

Overall, with the demise of third-party cookies underway due to Google’s forthcoming Chrome changes and Apple’s new efforts to lock down its ad IDs on its desktop and mobile OS, targeting for online advertising is going to suffer in the coming years, and budgets will shift accordingly. Yes, display ads are still prevalent within the industry and they will find a way to live on despite problems with fraud, effectiveness and transparency. However, the superior performance is achieved through sponsored listings will lead these placements to eclipse all others someday soon.

The Unique Staying Power of Sponsored Listings

These days, my view on the advertising industry looks through the lens of travel. Since 2015, Koddi has seen sponsored listings grow as a percentage of hotel budgets from one out of every five dollars spent to one out of every three. We expect this trend to continue in the coming years, as the saturation point in metasearch draws ever nearer and as new sponsored listing offerings continue to emerge. These are trends that apply to other industries as well.

So, why are sponsored listings, specifically on marketplaces, going to be the ad unit of the future? Consider these unique strengths:

• Marketplace sponsored listings are relevant to the consumer without being obtrusive. They fit in the experience like search ads, and they don’t distract from it.
• They perform highly on a CPC and ROAS basis because they find buyers that are in-market (i.e., on a specific marketplace) for precisely the product or service they’re promoting.
• Marketplaces themselves are growing in importance. Consumers enjoy the convenience of Amazon, eBay, meal and grocery delivery and others as compared to buying one-off from small vendors and having to submit their personal information to a lot of different parties, many of whom are unknown to the user.
• Marketplace sponsored listings record activity without being nosey, they convert well without being pushy, and they allow advertisers to get a message out to likely buyers at the right time, in a crowded competitive field.

Practices around personally identifiable information (PII) will continue to receive more scrutiny. Cross-site tracking will continue to become more challenging. Consumers will migrate away from so much social media usage, and commercial search traffic will continue to be siphoned away by apps and marketplaces. Only one ad unit stands to gain from all these trends: the marketplace sponsored listing. I welcome all debates below.