The Good, the Bad and the Ugly of Paid Ads

Amazon is in hot water over its paid ad strategy, and leaders of smaller brands must learn from its mistakes.

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By Caroline Jerome

Opinions expressed by Entrepreneur contributors are their own.

Paid advertising has long been considered a popular customer-outreach method because, well, it works. In general, paid ads expose more people to your brand and help generate demonstrable business growth. Accessible metrics give fast results, costs are easy to measure, return on investment is easy to track, and campaigns are controllable and optimizable. U.S. advertisers understand this; it's why they spent more than $190 billion on digital ads in 2021, according to Statista.

For all its perks, however, paid advertising is tricky to do well — and there are consequences for those who cut corners. Amazon, for instance, is under fire for its allegedly deceptive paid ad strategy. In early December 2021, the Washington Post reported that the Strategic Organizing Center, a coalition of labor unions, had filed a new complaint with the Federal Trade Commission.

Related: 5 Amazon Ad Settings You Shouldn't Ignore

The complaint, grounded in the review of more than 130,000 product search results, accuses Amazon of failing to distinguish between paid ads and organic search results well enough, citing a several-second delay in labeling search results as sponsored. If Amazon is obfuscating ads, the FTC will likely find it in violation of important consumer protection laws.

A quick rundown of paid ad challenges

It remains to be seen where the FTC will land on these accusations of unscrupulous practices, but we can almost certainly bet that Amazon's digital ad business isn't going away anytime soon. The same Washington Post article reported that Amazon digital ads would generate approximately $25 billion in 2021 and capture nearly 12 percent of the digital ad market.

Related: 7 Reasons People Hate Your Ads -- and What to Do About It

Amazon, it's safe to say, will be just fine, but as a smaller brand, you don't have the same power and resources. Therefore, you need to be keenly aware of the challenges in creating effective, compliant paid ad strategies. For instance, do you lack foundational branding? If there's no messaging hierarchy based on personas, the whole paid ad system is disadvantaged from the get-go.

In fact, without positioning or well-defined objectives, running paid ad campaigns will feel more like a shot in the dark than a laser-focused marketing strategy. Plus, if your parameters are too broad or there are too many variables, you'll have a hard time engaging the right prospects. That's money down the drain.

And, of course, there are growing privacy concerns around paid advertising. Well-targeted ads are somewhat of a double-edged sword: Consumers expect relevant ads, but they've also grown suspicious of brands knowing too much about them, their interests and their recent web activity.

You need user data to deliver on consumers' expectations for personalization, but tread carefully when collecting personal information. Privacy regulations are constantly evolving, and brands that don't keep up could find themselves in regulatory hot water.

Getting paid ads right

If you're feeling nervous about running paid ads, that's a good thing. Too many brands run campaigns without doing their homework first and waste time, money and other resources as a result. The three tips below can help ensure that you're running more effective, fully compliant paid ad campaigns.

1. Cast a broad net

Customers' wants and needs — as well as how they search for them — are constantly shifting. Prospective customers will use various keyword combinations and display different intent signals (i.e., data points that indicate someone's interested in and/or interacting with your brand online) depending on various factors.

It's not humanly possible to anticipate every relevant search query that fits your product or service offering — Google, after all, sees around 5.6 billion searches every day. But that's where machine learning comes in.

Related: 5 Reasons Why Businesses Should Invest in Google AdWords

Smart Bidding in Google Ads takes the work of optimizing bids off your shoulders, and when used in conjunction with broad match, this strategy can help you meet your performance objectives. Take a broad match keyword such as "women's blouses," for example. That keyword could match relevant queries you and your team haven't even considered (e.g., women's work attire). By combining this keyword with Smart Bidding, you can utilize auction-time signals to set the right bid for every query.

2. Find the "why," then develop the "what"

This might be a difficult pill to swallow, but customers don't care about the features of your offering as much as what your offering will do for them. Think of paid ads through a problem-solving lens: People are searching for your solution because they have a problem worth solving — they just don't know how to solve it … yet.

Show them that you're well-equipped to make their pain points vanish through benefit-rich copy that's written with clarity and style. Remember: In short-form paid ad designs, the copy becomes a design element in and of itself, and one study found that plain-text ads (which are typical in Google) are viewed twice as much as image-heavy ads.

The Freecycle Network, for example, stokes interest with a plain-text ad aimed at the ongoing problem of recycling. The ad outlines which types of goods their customers can and cannot exchange. Plus, it includes phrases like "safe" and "contact-free pickup" to intonate the nonprofit network's values and vision, then uses a call-to-action to engage potential new members.

3. Carefully cultivate an audience

Audience segmentation can help you achieve your paid ad goals, but with Google ending the use of third-party cookies in Chrome soon, audience segmentation is about to get a whole lot harder. In fact, according to Ad Age, 80 percent of marketers are worried about how this move will impact ad personalization, performance efficiency and ROI.

Related: Why Segmenting your Target Audience Is Essential

However, the deprecation of third-party tracking cookies isn't the only hindrance to audience segmentation. Privacy regulations such as the General Data Protection Regulation and the California Consumer Privacy Act add another layer of complexity to segmentation, as brands need to ensure they're collecting customer data without compromising consumers' privacy.

Taken at face value, this seems intimidating, but don't throw in the towel just yet. Necessity has always been the mother of invention, so the first step to good audience segmentation is simple: Ensure that you have the required infrastructure to conduct multi-channel, real-time behavior tracking without third-party cookies. You can track events by implementing a code snippet using well-known tools such as Google Analytics.

Or suppose audience members are engaging with you across numerous digital touchpoints. In that case, you might consider implementing a customer data platform that helps you collect, clean and activate event data across platforms. Because customer data platforms organize data into a single customer database, you can create segments based on cross-channel engagement in one system.

Paid advertising might be a well-known marketing strategy, but it's far from simple, particularly as privacy laws continue to evolve. You don't want to find yourself in a similar situation to Amazon — especially if you don't have the kind of power and resources it has (and few do). Instead, do your homework before diving into paid ad campaigns and enjoy the fruits of your labor.

Caroline Jerome

Entrepreneur Leadership Network VIP

Partner and chief creative officer at TBGA

Caroline Jerome is a partner and chief creative officer at TBGA, a consultancy that provides next-level branding and marketing. She is an ardent proponent of the value of art and design in business.

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