Big Time Holiday Spending, TikTok Search, and Performance Marketing Is Costing You

In a world full of constantly changing technology and information, this monthly newsletter keeps marketers up-to-date on the latest trends that will impact their business. I hope you enjoy it!

If you haven't subscribed yet, click the "Subscribe" button in the upper right corner above.

Holiday shoppers are set to spend $25 billion more this November and December than last year,  pushing total holiday sales to a record $990 billion. Digital sales are expected to grow significantly, with an 8% to 9% rise to $295 billion, reflecting the ongoing shift to online shopping.

Despite inflation pressures and higher interest rates, households have demonstrated a resilient spending capacity. NielsenIQ's latest consumer outlook even predicts a 6% increase in consumer spending by 2025. Interestingly, 30% of consumers report being in a better financial position than a year ago, which suggests a stronger-than-expected consumer confidence heading into the holiday season.

However, there are areas where consumers are cutting back. NielsenIQ highlights reduced spending on out-of-home entertainment and dining. So, while consumers may be cautious about discretionary spending, they are still willing to make online purchases that offer value and convenience. Additionally, the study notes the rise in AI-powered purchase recommendations is an emerging trend. Consumers are increasingly receptive to personalized AI shopping experiences, which presents an opportunity for brands to leverage AI in their marketing strategies to capture demand. With consumer confidence growing, brands offering value and convenience will stand out.

While recent sales forecasts are promising, not all brands are experiencing the same success. Many still need help with high cart abandonment rates and declining conversions. Globally, the average cart abandonment rate was 73.9%, and the top reason US consumers cited for abandoning carts was high extra costs, including shipping, taxes, and fees. Other factors included:

• - Mandatory account creation.
• - The fact that they didn't trust the site with their credit card information.
• - Delivery was too slow.

Shipping fees, particularly for returns, are a concern for today's shoppers. In fact, 77% of consumers now check the return policy before making a purchase, and nearly a third said paying for return shipping was more annoying than jury duty and going to the DMV. While charges for returns might help reduce returns and extra costs, they can also significantly impact sales, especially during the peak holiday shopping season. For brands it may be time to evaluate how your policies and checkout experiences might deter potential buyers. With the holiday season in full swing, offering clear, consumer-friendly policies around shipping and returns and simplifying the checkout process can reduce friction and boost conversion rates. 

Now let’s talk TikTok. TikTok finally jumped on the AI-powered bandwagon following the launch of Smart+ (similar to  Meta's Advantage+ and Google's Performance Max). Smart+ is the AI-powered performance solution designed to maximize returns by automating campaign management across targeting, bidding, and creative.  TikTok hopes it lowers the entry barrier for testing for new advertisers.  They also recently rolled out Conversion Lift Studies, which will help advertisers measure the overall impact of their TikTok campaigns.

TikTok also announced its more robust search product as it started letting advertisers target and bid on keywords on its search results page with TikTok Search Ads campaigns.  While TikTok's search results page already includes ads, brands will now have full control over the entire experience, allowing brands to place ads based on a user's query. TikTok's search ads will work similarly to traditional search, forcing TikTok marketers to become more knowledgeable about search trends on the app. This is not something where you can port over your Google keywords to TikTok. Unlike Google, where search intent is often transactional, TikTok users search with a more exploratory mindset, requiring marketers to understand how consumers discover relevant content on the app.  Brands have wanted this for a long time, so it was only a matter of time before TikTok launched it.  Not only do you have more control, but TikTok's own data says search ads lead to better business outcomes.  TikTok's research shows that more and more people are using its app as a search engine, with 57% of its users utilizing its search functionality and 23% of users searching for something within 30 seconds of opening the app. With this new capability, TikTok says brands will be able to reach users when they are actively exploring content and looking for something specific. TikTok also found that advertisers that run Search Ads in addition to In-Feed Ads see a 20% increase in conversions on average. The company also found that Search Ads have a higher chance of conversion than In-Feed Ads. This shift isn't happening in isolation. With advances in search on platforms like Perplexity, TikTok, and Amazon, Google's share of the US search ad market is expected to drop below 50% next year for the first time in over a decade, according to EMARKETER. If you are still exclusively reliant on Google for your search strategy, you are missing out. Your consumers are searching in new places, and it's time you meet them there.

Speaking of Google, they announced new ways for marketers to reach customers through AI Overviews and Lens.  Ads in AI Overviews are now available for mobile users in the US. The ads appear directly underneath the organic AI-generated answer in the AI Overview. For instance, if a user searches "how do I get a grass stain out of jeans?" the AI Overview might suggest solutions using household items or commercial products, with relevant Shopping ads displayed right within the overview. While labeled as sponsored, the close proximity to organic AI recommendations could make these ads feel like an extension of the AI's suggestions, potentially driving higher click-through and conversion rates. However, there's a trade-off. Unlike traditional ads at the top of the SERP, these ads are positioned below the fold, requiring users to scroll, which could impact visibility and performance. It's crucial for marketers to monitor these campaigns closely as they gain traction to assess how the new format affects performance.  With Google's AI Overviews reshaping the search experience, brands have an opportunity to integrate seamlessly into user journeys. Marketing teams should track performance carefully in the coming months, optimizing campaigns as consumer behavior adapts to these new ad placements.

Google Lens, which allows people to search for what they see, now has nearly 20 billion visual searches, and 20 percent of all Lens searches are shopping-related. Now, Advertisers can capture these searches with Shopping ads that will appear above and alongside visual search results by the end of the year. Lens will bring together Google's AI models and Google's Shopping Graph — which has information on more than 45 billion products — to identify the exact item in your photo. Google is embracing evolving search behaviors with AI Overviews and Lens, providing advertisers with new ways to reach users at key moments. These AI-driven tools make it easier for brands to engage with consumers who are actively searching and ready to buy in-store, online, or on the go.

Amazon recently held two big events (Accelerate and unBoxed), during which they rolled out a variety of new features and tools. Below are some highlights and what they mean for sellers.

1. AI Creative Tools: Content creation has been a pain point for many advertisers and brands, and Amazon is aiming to fix that with new  AI-powered creative tools, including a video generator, an audio generator, and an AI creative studio. I'm particularly excited about the Video Generator, which simplifies video ad creation by generating custom videos from a single product image at no cost.  This is very timely, considering that 89% of consumers want more videos from brands this year, while businesses identified time and cost as the main hurdles to creating more videos.
2. Multi-Touch Attribution: A new multi-touch attribution (MTA) feature provides insight into the impact of upper and mid-funnel ads on conversions, offering a deeper understanding of the customer journey. MTA allows marketers to see the cumulative impact of brand awareness and consideration campaigns, highlighting which touchpoints drive engagement and influence purchase decisions. By attributing credit across various stages of the funnel, brands can better optimize their marketing spend, allocate resources effectively, and refine their strategies to focus on high-performing channels and messages.  As most sellers have capped out on the search product on Amazon, this new tool will allow easier investment in top and mid-funnel campaigns.  We all know the importance of a full-funnel marketing program, and now being able to put an exact dollar amount behind the value of the upper and mid-funnel will make the approval and testing process much easier.  
3. New analytics tools also provide sellers with more data-driven insights, including:
4. - Customer Journey Analytics identifies trends and pain points in the buyer's journey, helping to improve the shopping experience and conversions.
5. - Enhanced Tailored Audiences segments customers by interests, supporting cross-selling and new customer acquisition.
6. - Custom Analytics, set to pilot soon, will offer sellers a comprehensive view of key metrics, from sales to ads.
7. Visual search features: Amazon continues to innovate in visual search to help customers quickly and easily find and discover the products they want and need from Amazon's wide selection. Amazon says it has seen a 70% increase yearly in visual searches worldwide as customers use these new features. Amazon's recent updates allow users to enhance visual searches with text, upload an image, circle the item they want to search for or tap a "More like this" button on any product image in Amazon's search results to find similar products.

PayPal formally rolled out PayPal Ads and is ready to start testing this new ad product for the upcoming holiday shopping season. PayPal's unique selling point is its data with access to 400 million PayPal users, 90 million Venmo accounts, and millions of Honey users—combined with data from 225 billion transactions across millions of merchants—PayPal offers robust targeting capabilities that few platforms can match.  Their data should allow advertisers to engage consumers at every stage of the shopping journey, from discovery to purchase, while benefiting from closed-loop attribution, which tracks the full path to conversion.  Initially, PayPal Ads will sell display ads across its own properties, with plans to expand to video ads within the next year. This expansion means advertisers can reach a vast network of e-commerce shoppers across millions of merchants who already use PayPal's payment technology, creating a comprehensive ecosystem for targeted advertising. Marketing teams should consider testing this platform during the holiday season, given its unique ability to drive conversions.

Finally, Interbrand's Best Global Brands 2024 report is out, and with a variety of amazing takeaways, one of the most impactful indicates that a lack of investment in long-term marketing strategy over the years has left marketers with heaps of unrealized value. Specifically, the report has revealed that while performance marketing strategies can drive short-term gains, disregarding long-term strategy costs brands unrealized value. That value equates to $200 billion in lost revenue for the last year. Since 2000, that equates to at least $3.5 trillion.

---

Megan Conahan is a 19-year veteran of the digital marketing industry. Over the last 19 years, she's consulted with Fortune 1000 brands on negotiating the ever-changing demands of the digital marketplace and creating unique solutions to set them apart. Megan is an EVP at Direct Agents, an independent and minority-owned digital marketing agency. If you want to chat about marketing support or just talk shop, please message me or email megan@directagents.com

Check out my Podcast, where Libby Rodney and I discuss how Gen-Z's consumption habits are reshaping markets, the rise of "Junkflation" and its impact on perceived value, and the growing influence of review culture on purchasing decisions. You can watch or listen here.