Frederick Vallaeys Amazon and the future of e-commerce
Customer experience, Customer Retention, Ecommerce Growth, Growth Interviews

Frederick Vallaeys: How Amazon Gains Ground In Pay-Per-Click (PPC) And The Future Of E-commerce

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Welcome to Growth Interviews!

Welcome to Growth Interviews, the fun, stimulating and engaging series of conversations driven by digital business growth.

Our mission is to provide insights and ideas from world-class professionals on the topic of growth and to cut through the noise of so-called marketing tips and tricks, revealing the money-making strategies behind e-commerce.

Each episode is an intriguing challenge involving an insightful expert who reveals some of their best-kept secrets, which you can use right away to boost your business.

In this week’s episode of Growth Interviews, we invite you to join our conversation with Frederick Vallaeys, the co-founder of Optmyzr, a leading influencer in PPC (pay-per-click) search marketing, and one of Google’s first 500 employees.

Frederick helped pioneer pay-per-click marketing as Google’s first AdWords Evangelist. Today, he and his team continue to shape and influence the industry through deep automation, driven by the advancements in machine learning and artificial intelligence.

His recently published book, entitled Digital Marketing in an AI World, provides his first-hand historical view of pay-per-click marketing and critical insight for digital marketers and agency executives who are forging their own paths in an increasingly automated segment of marketing.

In this week’s interview, we chat about how to be smart in e-commerce and how to remain competitive in the market even with Amazon as the scarecrow of the retail industry. So, take out your pen and paper and get ready for 10 minutes of pay-per-click search marketing lessons.

 
 

We are sure there are many things to learn from Frederick’s experience, so we have written down his words and the ideas that stuck with us.

Taking the first steps in Google

How did you get into the digital space?

Frederick: My name is Fred Vallaeys. I am the co-founder of Optmyzr. My claim to fame in the industry is that I joined Google really early on, in 2002, so I was one of the first 500 employees there and got to do some exciting things like building the AdWords editor and buying a company called Urchin – now better known as Google Analytics. I was deeply involved in quality score, but left Google after 10 years and decided there were still some unsolved needs in the digital marketing space, so we built a company called Optmyzr. We really helped a lot of agencies, PPC experts and in-house teams to execute more efficiency on the strategies they know they should be doing throughout the tools that we built.

What frustrates you about the current digital landscape?

Frederick: I think Google is building these tools for millions of advertisers, sothey always build it to the lowest common denominator at some level. Then, you have all of these PPC experts who’ve done shows – like the one we’re on today – and they really want to do very specific things and they want to do that efficiently because they know that just produces better results.

Google sometimes makes it hard to do those things in an efficient manner. Now that’s a frustration, but it’s also an opportunity, obviously, for me to go and build tools and scripts that make all of that easier.

Thirteen years ago, Google launched AdWords and introduced marketers to the new world of pay-per-click advertising. This means:

👉 Anyone can easily grow their business nowadays using PPC marketing

👉 It is a tool that addresses millions of people and has to solve many business needs, so it has to be simple and not too ‘niche’

👉 The need for bid management tools is now greater than ever. This created an opportunity for other businesses to come up with solutions on top of AdWords for advertisers that want to go really in-depth and optimize their campaigns for maximum efficiency.

Amazon gains ground in Pay-Per-Click (PPC)

What are e-commerce marketers missing out?

Frederick: I think e-commerce is one of the fastest growing fields in PPC, so you’re actually seeing tremendous growth in Google in terms of how much volume is being done on shopping ads. For US-based retailers, something like 80 percent of their clicks nowadays come from the shopping ad format.

It’s also quite interesting to see that shift towards Amazon. Amazon is actually starting to take very significant advertising dollars away from Google, because they have a great marketplace, too.That’s one of these opportunities for advertisers who are so used to working with Google and keywords and cost per click bidding. How do they transition to Amazon? It’s actually quite similar, but there’s just a bit of a shift that they have to do. That’s something we’re working to make a lot easier.

Do you think Amazon selling standard products is jeopardizing normal retailers?

Frederick: Absolutely! I think if you’re a normal retailer and you’ve just been coasting for years and you don’t have the best prices and the greatest delivery mechanism, obviously you’re going to be challenged by the technology player who’s coming in and making things more efficient.

That’s often a mistake that advertisers make when they think about being on Google Ads and they think, ‘How do I raise my bid? How do I become more competitive with Amazon when it comes to outranking them?’ They get frustrated because they can’t bid the same prices that Amazon does. So, they are like, ‘It’s impossible! What’s going on?’ I think what’s going on is that your business may not be as efficient. You may not have negotiated as-good shipping rates.

Am I saying that it’s easy to do? Absolutely not. Amazon has some serious advantages and they may be unfair ones, but that is the reality. So, if you can’t fix the underlying business, the difference is you may never be in a position to really compete if you’re purely looking at just putting in a higher bid.

Is it a safe bet to place your products on Amazon anymore?

Frederick: What you’re saying is, if you have a really strong brand, you don’t need to be on Amazon, because people will still find you and come to your site directly if you’re selling a more generic product. I think we’re actually headed towards a world where the brand is much more important –  maybe not so much from the Amazon perspective, I think that kind of plays into it – but more from the voice search perspective.

If you think about the voice interaction and me, in my kitchen I have a Google Home and an Alexa device. If I need new products, or I need to refill something, it’s the thing that I’ve always been buying or the thing whose brand I recognize. So, I think the brand is becoming much more important and it’s something you should invest in if you can.

PPC is one of the quickest ways of seeing positive ROI, so it is no wonder e-commerce is one of its fastest-growing fields. Google is dominating the pay-per-click advertising game now, but with Amazon joining in, marketers have a new opportunity to engage customers throughout their buying journey.

This is both an opportunity and a threat. While some retailers fear the ever-growing e-commerce giant will push them out of the market, others take it as a challenge and an opportunity to strengthen their brand. Take voice search, for example: for companies that sell on Amazon, getting Alexa to choose your products when you have a purchase history sure is an opportunity one cannot miss.

How to be smart in e-commerce!

Tell us a short story about a customer that got good results from you.

Frederick: We see really interesting scenarios. Customers know what’s going on in their business and how that connects to results in PPC, but they always get stuck on the fact they can’t do anything with it.

One of my favorite examples is a customer who figured out that depending on how many sizes were available for shoes that they sold, that would really impact the sales that they would get for that shoe. That makes sense, if you think about it. If you’re selling a shoe and you only have size six available in the US, or size 35 in Europe, which is on the smaller side, you’re not going to sell that many, because most people might be looking for a size 40 or a size 10 in the United States. So, setting higher bids when you recognize that you have those correct sizes in stock, those are some success stories that we’ve seen.

Tell us three ideas for e-commerce marketers to grow their businesses in 2019.

Frederick: These are specifically tied into what we believe at Optmyzr. We believe that you need to have a grip structure – groups of individual products, one SKU per product group – because that enables you to do smarter bid management. What that means is that if you have a finding one day about the example for size, you can actually act on that, because each size is a different product group. Or, if the next day you figure out, ‘Hey, we’re getting into spring and the big color this year is purple.’ We didn’t know that last year, but now we can actually say, ‘Let’s find all the purple products, because they’re each in one product group and just increase the bids for those.’ The grip structure is really important.  That comes down to tip number one, which is: structure your account so you can do this.

Tip number two is: find an analysis tool or do the analysis to actually start to get these insights.

The third tip is maybe a more obvious one in shopping, but when you create a GoogleAds product group structure and the products in your merchant feed are changing, it actually gets out of sync. GoogleAds all of a sudden puts all of these new products in the bucket of everything else. Those are generic bids. That’s not a good performance or controlled performance. So, figure out a way to make sure that your GoogleAds is always in sync with what you actually sell in your merchant feed. These are inventory-driven campaigns and inventory-driven product groups.

Also, go to where the customers are. We’re seeing all this money shifting towards Amazon, so if you’re not doing that yet and if you’re still just on GoogleAds, go ahead and shift over to Amazon as well. Maybe a little bit less relevant in Europe than it is in the United States, but Bing is also an important player. The beauty of Bing is that they copy exactly what Google does. If you’ve got your Google merchant feed and your Google product group structure, you can just copy that over into Bing and take advantage in the United States of about 30 percent new traffic on that.

Tell us your take on customer retention.

Frederick: Well, you paid a lot of money for that customer to come in the first place, so if you can retain them, that’s kind of a big win.

The other thing to think about here is, what’s the value you derive from your conversion? If you think about a twenty-dollar cost per acquisition for one conversion, that kind of limits you, but if you start thinking about the lifetime value of that customer, then all of a sudden, maybe you can afford to pay a one-hundred-dollar cost per acquisition. That makes you far more competitive in the auction and all of a sudden you can compete against much bigger players.

As far as steps go: follow up, set up a remarketing list so once you’ve got that customer, don’t just let them go, but remind them, ‘Hey, there are other products that people like you may have enjoyed buying!

Maybe you sold a refrigerator and you remarket that, ‘Hey, it’s been two years actually…’, but that’s kind of difficult to do because of cookie length. But, think about it in this way: ‘Maybe you need service at some point that we can provide as well.’ So, you build an ongoing relationship.

How to grow your e-commerce business in 2019:

👉 Structure your account so you can do smarter bid management

👉 Do an in-depth analysis of your data to get as much insight as possible

👉 Go where your customers are

👉 If you’re targeting the US market, don’t underestimate Bing Ads.

Explaining artificial intelligence in human terms

Tell us your take on machine learning and AI in the digital model.

Frederick: I’ve actually got a book on Amazon right now about, How to future proof your career with all this AI that’s coming out in PPC, and there’s really a couple of core things here.

Your job is going to change, but you’re going to have an opportunity to be sort of the pilot of PPC where you’re always monitoring whether things are going right. You can be the teacher, teaching the machine how to do a better job of running PPC, or you can be the doctor, the one who has empathy, who understands humans, who can put all the pieces of machine learning together.

Keep in mind that a lot of the machine learning we see today is still very specific. One thing to fix budgets, one thing to fix bids, one thing to fix keyword targeting. You, as the doctor, have to figure out what is the best medicine for the problem that the customer – the client – has. Then (you must work out) how you put those pieces together so they actually interact nicely together and how you explain it to the clients. A lot of people are fearful of automation and AI. It’s actually really good stuff, but you have to be able to put it in human terms.

If you fear AI will take over your job, you should know that the intent behind much of AI is to free us from mundane repetitive tasks, giving us more time to grow our intellects and businesses, with more interesting, evolving actions. Yes, AI destroys jobs, but it also creates new ones, and you should look at yourself as the mastermind behind the scenes.

Conclusion

To wrap it up, AI is definitely reshaping the future as well as the e-commerce landscape. Smart bid management is helping businesses to save time, money, and sell more, so retailers who refuse to innovate may soon end up on the curb, stagnating.

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