Internet businesses have four monetization strategies: advertising, subscriptions, data monetization, and organic revenue. E-commerce and marketplace businesses are prime candidates for digital advertising. In addition to revenue generation, ad dollars are highly profitable and provide tools to better understand customer trends and help build supplier relations. These can all be addressed through an advertising technology (AdTech) stack—a complete digital technology software designed to oversee all aspects needed to show ads on a company’s website. An AdTech stack covers everything from campaign management and reporting to public application programming interfaces (APIs), budget management systems, and ad relevancy algorithms.
The power of digital advertising
Advertising is and has always been one of the most important monetization strategies for businesses. When it comes to Internet businesses, digital advertising is a powerful tool that boosts profitability. According to a 2023 trends report by Smartly.io, 60 percent of consumer-facing companies said they plan to invest more in digital advertising tools and technology. A report by Statista predicts that ad spending in the digital advertising market could reach up to $680 billion this year. Increasing profitability can be achieved by companies that cast a wide reach to consumers and enable their brands to engage with potential buyers at the correct time in the purchasing funnel.
Any internet business with decent footfall, page views, and a robust number of customers visiting them can feel comfortable investing in an AdTech stack and harnessing its power. In addition, a marketplace business trying to match suppliers and consumers (e.g., Uber, Amazon, Meta), is ripe for AdTech stack advertising on its platform. Investing in an AdTech stack, however, requires an upfront investment—something not all companies may have.
Creating a successful stack
If the funds are available, then first and foremost, companies should invest in an AdTech stack early on and adopt advertising as part and parcel of their core business instead of considering it as an afterthought. Second, companies can leverage their APIs as soon as possible to hone in on the correct resources and take advantage of the best time management strategies. Ideally, businesses will build their own AdTech stacks rather than working with a third-party vendor because this allows them to have more control over ad relevancy, customer experience, auction, and profitability, all of which are key to a business’s success.
While outsourcing its AdTech stack may lessen a company’s time to market and enable its site to go live more quickly, in the long run, it’s not beneficial. One reason is that it will be a generic platform that hundreds of websites can be run on. In order to gain the maximum benefit, it’s important for the stack to be customized for a company’s unique use. This also requires building a company’s AI algorithms to ensure there is a delicate balance between organic and paid content. Without that algorithm, companies will leave money on the table or deliver a poor customer experience by showing more ads than required.
Some strategic forethought is required to make sure that companies avoid the pitfalls associated with an AdTech stack. Naturally, it’s exciting and tempting to increase ad spend once the profitability of an AdTech stack starts to kick in. The dollars are lucrative, the algorithms are showing high profitability, and the temptation is high to ramp up the advertising. Unfortunately, doing so at the expense of the customer’s experience will be detrimental in the long run. There is a fine line between organic and paid content. Understanding that sweet spot and maintaining that balance is key.
While creating their own AdTech stack is important, companies will do better overall if they seek help from existing mature AdTech partners, such as ad agencies, trade desks, and even Google. Doing so allows a company to tap into an even bigger customer or client base. By integrating more partners, companies will have better insights and more data and will be able to tweak their models accordingly.
Long term benefits
In addition, by investing in AdTech stacks, companies can not only boost profitability but gain important insights into how their business is running and adjust accordingly. These insights include obtaining a better understanding of customer segmentation, seasonality, and trends, as well as improved relationships with advertisers, which are a critical part of the marketplace equation.
The future of online advertising technology will only grow on an AI-driven platform with greater augmented and virtual reality. More paid content will crop up on marketplace websites, together with an uptick in auction-driven advertising that directly influences buying practices. By investing in AdTech stacks early on, incorporating advertising as part of their core business plan, building their stacks in-house, and leveraging APIs, companies can get ahead of the curve and create a top profitability strategy that will see them boost their bottom line well into the future.
Featured image provided by Mikael Blomkvist; Pexels; Thanks!
About the Author:
Someshwar Bindu is a director of product – AI/ML at a major e-commerce company. He has extensive experience in AI, advertising technology, e-commerce, and product management. Someshwar holds an MBA from the University of North Carolina and completed the Product Management in AI Era program at Stanford University and the Post-Graduate Program in Artificial Intelligence for Leaders at the University of Texas. For more information, contact [email protected].