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Making Sense of Sponsored Search on Amazon and Walmart: Part 3 – Offline Revenue
Part three of an installment series examining the different ways of approaching attribution, ad ranking, profitability, and other mechanisms across the sponsored search offerings of Walmart and Amazon.

In the previous installment, we took a look at attribution across both platforms. Within this article, we’ll focus on how they each take offline revenue into account.

Offline Revenue

Neither retailer tracks offline sales generated by their sponsored search ads online. Offline revenue plays more of a factor in Walmart’s results, but Amazon’s effect on offline shouldn’t be discounted.

Amazon is nearly a 100% online storefront. They do boast physical locations in larger metropolitan U.S. cities in the form of their Amazon Books and Amazon 4-Star locations. Inventory at these locations, however, is extremely limited. The amount of attributable revenue driven at these locations based on interactions with paid ads could be something worth tracking if they did a wider roll-out (with more shelf-space) and reached more consumers.

Despite the lack of physical locations, Amazon can often be credited with influencing purchase in-store at the physical locations of other retailers. Amazon’s site plays a pivotal role in the research process of a lot of purchases made off Amazon, as well as on.

Sellers can create brand stores and deploy PDP-based enhanced content within Amazon’s environment, making their Amazon storefront an extension of—or in some cases a replacement for—their own site. Consumers often use it as a one-stop-shop to leaf through reviews or gain a better understanding of the product and its overall features. They pull in everything they can within Amazon’s site before making a final purchase decision, which has the potential to occur somewhere other than Amazon.

For example, a manufacturer could have a paid search ad that takes a consumer to Amazon. That consumer might also end up clicking on a sponsored search or display ad within Amazon while checking out their brand. Once they hone-in on the product they’re looking for, they may do some comparison shopping off Amazon and discover their local Walmart (which is a half mile away) offers that same product at pricing better than Amazon’s.

Now, Amazon didn’t technically bring in that sale for the manufacturer, but it played a huge part influencing the eventual in-store sale at Walmart. Despite being almost 100% online, Amazon and its various on-site ad formats still play a major role in eventual in-store purchases.

Unlike Amazon, Walmart thrives on physical, in-store sales. As of Q1 2020, there were over 4,750 Walmart locations in the U.S. alone. They did recently see a 74% increase in online revenue due to COVID, but they’re still known more as a traditional, brick-and-mortar retailer.

For Walmart, online sales don’t tell the whole story. It’s in their best interest to demonstrate how media purchased via their advertising arm, Walmart Media Group (WMG), can help drive both online and offline purchases. They do just that for their display media. Display buys via WMG have the added benefit of being able to track both online and offline sales. Helping to demonstrate the influence display media has on consumers beyond their interactions with Walmart’s site.

Unfortunately, for sponsored search ads bought via WMG, this isn’t the case. Sponsored search ads tally only online purchases within their reporting metrics. No offline data is captured or included within its outputs.

Now, the idea of incorporating offline revenue does carry with it a certain view-based assumption, one that has historically been applied to display and not to search. Display is a medium that contains imagery, and influences via this imagery, laying the foundation for a potential future interaction with the brand.

One can argue that sponsored search via commerce platforms such as Amazon Advertising and WMG also carries some weight as it relates to view-through and potential offline interactions. Sponsored search within WMG is an a.) image-based format that b.) captures a consumer’s attention in hopes of c.) influencing an eventual purchase. Whether that purchase happens directly as a result of clicking on that search ad or indirectly as a result of simply viewing it, it ultimately influenced the purchase. The same goes for offline; whether someone clicks on an ad and converts online or eventually converts in-store, the ad influenced the eventual purchase and should get credit.

A typical display buy on WMG can expect roughly 60%-80% of its reported revenue from offline sales. If offline data was accounted for via sponsored search ads, they could expect to see at least a marginal percentage bump in additional revenue driven in-store.

The moral of the story: Walmart Sponsored Search Ads deserve extra credit for their potential to drive offline sales within their physical locations. Their reporting doesn’t readily account for this, but it’s inclusion of 24-hour view-through conversions can help offset the difference for the reasons noted above.

In the final installment of this series we’ll review how both Amazon and Walmart view profitability and how each accounts for margin.