The New Frontier of Ecommerce Advertising

Surging Online Sales

Even before the pandemic, large retailers were working to incorporate advertising into their online shopping sites. Now, as millions of customers have shifted to shopping online, those plans are being accelerated.

Target’s (TGT) online sales almost tripled during its most recent quarter. Kroger’s (KR) online sales surged 127% and Walmart’s (WMT) climbed by 97%. During the most recent quarter, COVID-19 restrictions were loosened across much of the country. The fact that online shopping remained so popular shows that these changes could be permanent. Especially during the early days of the pandemic, retailers struggled with the high cost of delivering groceries and making operational changes to meet customers’ needs. Now, they are seeing several ways to leverage their online sites to increase profits.

Keeping Up With Amazon

Companies are selling advertising space on their websites to suppliers, much like they would sell advertisements in a newspaper. These ads feature coupons or links to more information about brands. Retailers also have the ability to gather precise data about shoppers’ habits on their sites. This data makes it very easy for brands to track the efficacy of their advertising dollars on stores’ websites—easier than measuring the success of advertising on social media, Youtube (GOOGL), or other platforms.

Amazon has already seen rapid growth with this type of advertising, showing grocery stores and other retailers who are relatively new to the online sales landscape just how profitable this advertising could be. Amazon’s “other revenue” category, which consists mainly of advertising, climbed 51% to $5.4 billion in its most recent quarter, compared to the same period a year earlier.

Potential for Growth

Revenue from online advertising for companies like Walmart and Kroger is still far behind Amazon, but catching up quickly. A recent study predicted that Walmart’s ecommerce advertising revenue will climb 73% this year to hit $849.4 million. A survey of brands advertising through Walmart showed that 67% of them plan to increase their spending on these advertising strategies.

Analysts expect that Walmart will bring in about 7% of US ecommerce ad spending by 2022, equal to about $2 billion. Walmart’s overall revenue just in the US is projected to hit $364 billion this year, so the company’s earnings from online advertising are still a small percentage of its overall earnings. However, Walmart, Target, Kroger, and smaller companies see enormous potential for growth in the world of ecommerce advertising.

---

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS111602