eBay’s Promoted Listings Disrupts Traditional Ad Model

eBay has revealed Promoted Listings in a bid to challenge traditional ad payment models. The new ad offering enables online merchants to pay only when an item is purchased as the result of an ad click.

Promoted Listings works by allowing online sellers to select products they want to promote and set their own ad rate, which is the percentage of the item’s final sales price that the merchant is willing to pay back to eBay. The new ad offering is part of eBay’s “Commerce Advertising,” a suite of services that was designed to make better item recommendations to consumers based on their shopping behavior on the site.

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   Image Credit: eBay

With Promoted Listings, eBay is making a bold move in the advertising space, because the new service undertakes a cost-per-sale (CPS) model, where online merchants don’t pay for advertising unless their item sells.

Traditionally, most companies use a cost-per-thousand (CPM) or a cost-per-click (CPC) advertising model. For example, Google charges advertisers each time a user clicks on a link, and Mozilla opts for CPM in its first commercial ad offering Suggested Tiles.

Cost-per-click and cost-per-thousand based campaigns often expect marketers to have a sophisticated understanding of how much money they should spend on impressions or clicks that lead to sales. Compared to these two traditional ad models, Promoted Listings makes it easy by charging on a cost-per-sale basis, according to Alex Linde, vice president of advertising and monetization for eBay Marketplace.

“Online merchants will have full reporting to show their return on investment (ROI) in the service,” Linde says. “The reality is that eBay has an end-to-end view: we have impressions, clicks and sales data all on our platform. Therefore, we are in a position where we can allow sellers to bid a percentage of their product’s final sales price to increase visibility when items are relevant to buyer searches.”

CPS is an auction-based model: the more ad dollars online merchants are willing to pay, the more likely their ads will be seen and lead to a sale. The downside however, when eBay sellers bid for a spot in the buyer search results, they may end up overpaying for Promoted listing ads.

But Linde does not believe CPS will lead to overpaying. “As sellers only pay when an item sells, the merchant is saving money by not paying advertising fees for clicks or impressions that do not convert,” he explains.

eBay declined to disclose its revenue goals for Promoted Listings. In early June, the platform will start rolling out the ad offering to a number of eBay store sellers in the U.S., U.K., Germany and Australia. It will then extend to additional merchants in other countries throughout 2015.

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