Advertisements and sponsored listings are great ways to accelerate growth for marketplaces with the right dynamics; besides opening up new revenue streams, they can boost engagement on both sides, and can be used to incentivize participants to take more actions on the platform.
Given how different marketplace dynamics can be, even within the same sector and geography, there isn't an easy set of rules for readiness. There are a number of signs (and requisites) that the time is ripe for ads, though – we walk through some here, based on our own experiences with marketplaces that saw big boosts with advertising.
Listing locations are affecting conversions
Ads are about monetizing attention and real estate on your site. In order for those to be worth something, you need space on your site to be coveted.
There aren't hard-and-fast metrics, given how different marketplaces are across sectors. Some litmus tests, though, include:
- There are a lot of listings for certain categories; if searches yield multiple pages of results, this is probably the case.
- There's a significant difference between the number of clicks and conversions for the first few listings on your site vs. those near the bottom (or on other pages)
There are enough listers
This generally goes without saying, but you need enough competing listers to make an auction viable (as opposed to, say, simply charging a fixed price). This number doesn't need to be too high; for example, if you have 10+ suppliers on your marketplace regularly list in the same categories, then the auction economics will work fine.
There are listers that already do well
In order for ads to give boosts to listers on your platform, you need some example for paying advertisers to aspire to. You don't need to have everything figured out, but you should have at least a few listers that make significant revenue through your marketplace. There are a few reasons that this is important:
- These can be your first advertisers; if they're already making good money on your platform, they'll be more incentivized to invest in it as a channel
- They give you strong metrics to convince other listers. If you can show listers the kind of volume that can be done on your site, then they'll understand the benefit of improved rankings.
- They're proof that your marketplace provides value! If your marketplace isn't yet strongly benefiting any sellers, then there may be some other levers that need to be pulled re: product-market fit before you're ready to use ads to boost growth.
Listers are asking for it!
This one probably seems obvious, but there are more subtle ways that listers express their desire than "I want to pay to boost my offerings!". These include:
- Asking about how to stand out on your platform
- Asking about competition in their categories
- Signaling that they want to use your platform more heavily as a channel
- Signing up for other paid offerings (e.g. premium seller programs)
The best way to tell: try it out!
More often than not, there won't be overwhelming signs that it's time to try out ads. Like any business decision, it all comes down to communicating with sellers and running experiments.
This is usually a pretty hard decision for marketplaces, because creating an advertising program involves:
- Communicating the offering to sellers
- Creating ad auction infrastructure
- Making dashboards for sellers to create campaigns
- Running A/B tests to guage efficacy
Furthermore, it can be tough to tell whether ads aren't performing up to expectations because your ads targeting models are bad, or because ads aren't the right fit yet for your marketplace.
With Brist, we take all the guesswork out of introducing ads into your marketplace. We provide you with everything you need, from education & opt-in materials for your sellers to the engineering infrastructure and white-labeled lister dashboards for running ad campaign A/B tests. With our one-month pilot program, you can test-drive ads (and keep all ad revenue!) for a month and determine whether ads work for your marketplace for a fixed deposit, all while requiring only a few hours of engineering onboarding.
Interested? Set up a short consultation call here!