A Case for SKU-level Ads

Imagine Facebook as a shopping mall.  You hang out with your friends there all day, and retailers are trying to get you to come to their store and shop.  In the shopping mall, retailers use display windows.  On Facebook, they use display ads.  The strategy is the same – pick the most provocative products, display them, and try to get the customer to walk in the door or click through to the site and look at all the other products.  But there’s one key difference.

In a shopping mall, retailers can display three to five products at a time, but on Facebook retailers can display every product in their catalog.  But retailers are still using the same approach online as they are in shopping malls – they promote three to five products.  On Facebook, it’s now possible to programmatically create thousands of ads – one for each product – and target each product to exactly the right customer.  This is SKU-level advertising.

Google Product Listing Ads:

Google recently launched a SKU-level ad product called Product Listing Ads (PLA’s). With PLA’s, Google lets retailers promote a specific product in response to relevant search queries, including an image and a price (try searching for “digital camera”).  The first results are traditional Google ads linking to search results pages on the retailer.  The second set of results include images, price, and a link to a specific product page that is relevant to the search.

PLA’s have been wildly successful for Google and their advertisers.  The Click-through rates on PLA’s are 73% higher than text ads, and more importantly the conversion rates (actual purchases) are 35% higher.  Despite that Google only launched PLA’s in mid-2012, by the holiday season PLA’s accounted for 17% of Google’s total revenue.  Google has definitely struck gold with this strategy – I think they’ll be investing in PLA’s much more heavily in 2013.


Retargeting is another form of SKU-level advertising that works extremely well.  Retargeting is a technique to try to convert a customer that visited your site but didn’t buy anything.  It accounts for 13% of all display ads, although if you do much online shopping, you will see them a lot more.  Advanced retargeting techniques use SKU-level ads.  For example, if you visit a product page for a pair of pants on Zappos, you will likely see those same pants follow you around the web in display ads for the next week or so.  Retargeting is probably the single most successful innovation in display ads in the last several years – but its applicability is inherently limited to customers who already visited your site.

Beyond Retargeting – Using SKU-level Ads to Get New Customers

The key enabler of SKU-level ads is the ability to programmatically create ads out of thousands of products in real time.  Retailers have all the data necessary to create ads – sometimes they make it available in product feeds, but even if not, it’s all there on their websites and can be crawled.  But what gets really interesting is when you start using that data for more than just ad creation – but also to group the ads together into campaigns that align directly with marketing strategies.  For example, if your site just launched a back-to-school page, translating that to an ad-campaign could be as simple as crawling the back-to-school page and promoting every product there with the headline “Back to school sale.”

Once you have the ability to create ads on the fly, software can programmatically include or exclude your products from your campaigns based on your marketing strategy – by brand, price range, category, etc.  Then you can take those product groups and promote them to different audiences.  For example, promote Nike’s to anyone that’s bought Nike’s before.  Or, if you want new customers, target to people on Facebook who look like people who bought Nike’s before.  These aren’t new marketing strategies, but employing them at scale with thousands of individual product ads is now possible with the help of programmatic ad platforms like SocialWire.

What About User Experience?

Most ads still suck for users, but in some cases ads can be a win-win.  Back to the shopping mall example, as a customer, imagine if you never had to walk in a store, go up two escalators to get to the one rack of stuff you like.  What if you could just look in the display window and see exactly the products and brands you care about?  Even better online, you never have to leave Facebook – the store brings all the products to you through ads, and when you find one you like, you can just click through to buy it.  It’s like passive window-shopping while you do…. you know, whatever it is you do on Facebook – I’m not judging.