It’s a tough marketplace out there today — especially for online sellers like EBay Inc., which has watched sales go down in recent years as the competition heats up.
In a bid to earn more ad revenue (especially since the company’s split with PayPal is pending) and ostensibly help EBay merchants, the company will soon launch ads that merchants will pay for only if the ads result in actual sales.
“The service, called Promoted Listings, will let EBay sellers specify what percent of a product’s sale price they’re willing pay in order to run an advertisement,” reports Bloomberg. “The higher the percentage, the more prominent the ad will be, although EBay will also consider a product’s popularity and the seller’s reputation.”
This ad strategy is obviously an attempt to reinvigorate EBay’s e-commerce business, now trailing the rest of the industry. It’s risky, to be sure. Most don’t consider cost-per-sale tactics due to the risk of posting ads that turn out to be no-profit freebies.
“Instead, most companies, such as Google Inc., rely on cost-per-click ads, which charge marketers each time someone clicks on a link,” explains Bloomberg. “EBay’s new ad offering will help smaller merchants, which make up the bulk of the company’s 25 million sellers, because they won’t have to track the effectiveness of ads or pay before a sale.”
Alex Linde, EBay’s vice president of advertising and monetization, hopes the strategy will work out for both his company and EBay merchants.
“This way, there’s no upfront risk for the seller,” Linde said. “The only lever these sellers had in the past was price, and nobody wants to grow only by discounting.”
There’s no telling yet whether this gambit will do the trick for EBay, once the king of the e-commerce hill. EBay has sold banner ads to brands for years that used the site to promote their names and reputations. But ads from individual sellers — even smaller ones — is something decidedly new.
“It’s risky to guarantee a return on an ad,” said Lauren Fisher, an analyst at EMarketer Inc. “They could end up giving away a lot of advertising.”
Plans call for these Promoted Listings to be launched over time. The program is slated to commence in June with a few hundred sellers in the U.S., U.K., Australia, and Germany.