With the year-end shopping season coming up, which will be shorter than usual, competition for market share will be extremely fierce. In addition to the compressed retail rush, 43% of consumers have more debt than last year, according to a report from Salesforce, further intensifying the battle for attention.
As holiday bargain hunters flock to crowded malls and equally crowded online platforms, retailers will be competing for visibility in inboxes, on social media, and across the web. The challenge can be even greater for smaller D2C brands as they compete against national brands like Nike and Lululemon, which have the advantage of name recognition and multiple distribution channels in addition to direct sales.
Resonating in a changing digital environment
D2C brands have traditionally relied heavily on search and social media, consuming a significant portion of their marketing budgets. Almost 70% of marketing spend is spent on these channels. However, the rising cost of customer acquisition through digital advertising (up 50% over the past two years) is forcing brands to explore new strategies. Today, D2C startups often see diminishing returns on advertising investments very early in their growth stages, making diversification essential.
A recent study found that over 60% of e-commerce brands are not investing in Google Ads, showing that the digital advertising landscape is changing. Brands are realizing that sticking solely to search engine marketing (SEM) is not enough to stand out in today’s crowded marketplace, especially with rising costs and fierce competition for clicks.
search engine marketing
Search remains an important tool for driving traffic to your online store. Whether a consumer searches for “shoe stores near me” or “holiday gift ideas,” it plays an important role and accounts for multiple touch points along the buyer’s path to purchase. However, average cost-per-click for SEM has increased by 10% year over year due to increased competition and external economic pressures such as inflation.
This competition will intensify during the holiday season, with e-commerce brands likely to see higher prices and lower conversion rates as more retailers seek out limited inventory.
social media
Social media platforms, once the golden ticket for D2C brands, have become saturated. Consumers are exposed to in-feed ads, which creates fatigue and reduces engagement. The pressure to meet holiday sales targets has only increased the noise on these platforms, raising concerns about declining profits. Additionally, the landscape is becoming increasingly fragmented as new players emerge and viewership shifts from one platform to another.
As if things weren’t frustrating enough, Gartner reports that social media engagement will decline by 50% over the next year as more users turn away due to toxic behavior and misinformation online. We predict that this is possible. So while social media remains an important channel to attract users, it’s not a panacea.
display advertising
Display advertising offers a variety of targeting options, including contextual, behavioral, and demographic, but it’s also not a silver bullet. Banner blinding reduces click-through rates and many publishers struggle to monetize, which is exacerbated by the rise of low-quality made-for-advertisement (MFA) sites. In the US, the average click-through rate for digital display ads is just 0.10%.
Nevertheless, digital displays still play an important role in your overall media strategy. eMarketer predicted that U.S. display ad spending will jump 15.7% to $163.29 billion in 2023. Despite the flaws and challenges, brands still see value in digital displays as part of a diversified approach, especially when it comes to increasing awareness.
Go where shoppers go for seasonal success
As consumers change their digital habits, advertisers need to follow where they lead. Mobile phone usage has skyrocketed over the past decade, with users checking their phones more than 50 times a day. Importantly, they spend an average of more than four hours per day using apps. This creates a huge engagement opportunity for brands during the holiday season.
Mobile transactions are increasing as a percentage of e-commerce sales every year and are expected to account for 60% of all e-commerce revenue by 2028. Given the amount of time consumers spend on everything from gaming to messaging, brands have a huge opportunity to engage users. Single task environment with high concentration.
The gift of in-app advertising
One of the main benefits of in-app advertising is the high level of engagement it provides. In contrast to the desktop, where users juggle multiple tasks between tabs, apps require undivided attention. Most of the time, in-app ads are displayed in a somewhat subtle way, like TV commercials, introduced in between the action.
The ad unit itself is also attractive. Video and playable formats are engaging and interactive, allowing brands to convey their message with full-screen video and audio. Playable ads were once exclusive to gaming, but are now expanding beyond categories like retail and fintech.
In-app advertising also allows for very granular targeting. Brands can target users based on location, demographics, and more. Leading platforms use AI to predict user behavior and continuously optimize targeting to deliver better results over time.
In-app advertising consistently outperforms other digital channels. Consider the following statistics carefully selected by Embryo. These statistics highlight the potential of in-app advertising to improve performance.
- Apps convert three times more product viewers than mobile websites.
- The average click-through rate for in-app ads is 0.56%, while the average click-through rate for mobile web ads is 0.23%.
- Click-through rates for in-app video ads are 7.5 times higher than banner ads.
- The average click-through rate for ads within mobile gaming apps is 11.4%, the highest of all app categories.
Importantly, brand safety is a given when it comes to in-app advertising. One reason for this is that ad-supported apps need to retain users to increase revenue, so it’s in an app’s best interest to provide an engaging experience that benefits both users and advertisers. To become. This virtually guarantees that advertisers will never encounter an MFA-like experience in the mobile world. Another reason is that most in-app ads offer a full-screen experience. There is no opportunity for harmful content to appear next to your brand’s messaging.
As the holiday season approaches, in-app advertising presents a powerful opportunity for brands to diversify their channel strategies while engaging and even delighting shoppers. As consumers spend more time in apps and mobile commerce, there is a huge opportunity to stay ahead of the competition with interactive, full-screen ads that can drive meaningful business results. As consumers find just the right gift and marketers achieve their year-end goals, we could be in for a merry and bright holiday season.
paul kennedy is App LabinVice President of E-Commerce. AppLovin creates technology that helps businesses of all sizes connect with their ideal customers. Kennedy joined AppLovin in 2024 to develop the company’s e-commerce vertical. His career includes more than 15 years at LifeStreet, where he held multiple positions including co-founder, president, and vice president of business operations. Prior to joining AppLovin, he was the founder of Reperch, a consultant at BlocPower, and a trusted advisor to Remoov. Kennedy holds a bachelor’s degree in economics from Northwestern University.
