In-depth: ‘Intent vs interest’ helps E-commerce eat into social media adex

New Delhi: The “intent versus interest” approach is pushing e-commerce giants ahead of social media platforms in terms of garnering advertisers’ interest. 

Social media platforms cater to users with a browsing mindset, passively consuming content. While an eye-catching ad on social media might spark interest, the purchase journey can be lengthy and indirect. 

Rahul Vengalil, CEO of TGTHR, emphasised, “On social media, users are primarily there for entertainment, scrolling through endless content feeds. Their interest might be piqued by an ad, but the conversion process is often long and complex. Click-through rates typically fall below 1%.”

Some research studies conducted on a sample survey noticed that users have been increasingly questioning the privacy regulations across social media. This further adds to their dilemma of clicking or not on a link posted on social media, taking them to another external source. The survey revealed most of the users prefer not doing so, thus, let alone be conversion rates but even click rates go for a toss as brands would consider for their products/services. 

E-commerce platforms, however, cater to users with a clear buying intent. As Vengalil puts it, “I am on social media, doom-scrolling just to kill my time. But if I open apps for either quick commerce or e-commerce, it’s deliberate to look for products and services I am considering buying. Then the advertisements across e-commerce would have a higher success rate of luring me than if I stumble upon something randomly on social media.” 

This translates to a significant advantage in conversion rates – the percentage of viewers who become paying customers. 

Social media platforms rely heavily on third-party data, a resource becoming increasingly unreliable due to privacy concerns. Elara Capital's Senior Vice-President, Karan Taurani, highlighted the advantage of e-commerce platforms: “They have access to their own user data – a treasure trove of user purchase history, browsing behaviour, and preferences.”

This first-party data allows for superior ad targeting and personalisation, leading to a higher return on ad spend (ROAS) for brands.

Marketing consultant Tania Jain indicated in an interview with an external source previously that e-commerce ad campaigns often boast ROAS figures exceeding 5:1, compared to social media campaigns which can struggle to break even.

Moneka Khurana, Country Head and board member, MMA Global India, said, “E-commerce platforms like Amazon have reported substantial ad revenue growth, outperforming social media and search ads consistently. As per the MMA Global India & Publicis Commerce report ‘D2C Advantage X Toolkit: Guide to Maximise ROI of E-commerce Investments’, between 2014 and 2022, Indian e-commerce received a total funding of $31 billion.”

Noticing the unpredictable nature of consumer behaviour, Taurani said, “Today I think India's e-commerce advertising is not more than about 10% of the digital advertising and globally the number is almost about 25-30% e-commerce is led by digital advertising by e-commerce platforms. The more we see the adoption of online shopping, the more we see the number of apps, the more we see the market getting fragmented, the more we see brands wanting to invest in e-commerce platforms because they get better ROI and they get better conversions on e-commerce platforms."

Industry reports paint a clear picture. Spending on e-commerce advertising is demonstrably on the rise. eMarketer predicts that e-commerce ad spending will surpass social media ad spending by 2025, reaching a staggering $547.3 billion globally. Conversely, social media ad revenue growth is expected to slow significantly. Gartner, a leading research firm, revealed a decline in social media usage by 2025, further impacting ad revenue streams.

However, Tejas Maha, Group Head- Paid Media at White Rivers Media, offers a contrasting perspective in a recent interview with Best Media Info. “Social media is evolving alongside e-commerce, not clashing,” said Maha.

Platforms are becoming one-stop shops, integrating shopping features and using data to personalise the user experience. This synergy, according to Maha, boosts both social media engagement and e-commerce loyalty.
For social media to stay on top of the ad game, Maha emphasised user experience as the dominating factor. Seamless interfaces, quick issue resolution, and engaging content that resonates are key. Loyalty programs and data-driven decisions can further lock in users.

Adding to this, Amita Srivastava, Vice-President at West, Carat India said, “They can also leverage influencer marketing more effectively by strengthening tools for influencer partnerships and branded content. Investing in AI and machine learning can improve ad targeting and analytics, while introducing more interactive and immersive ad formats, particularly video content, can help maintain advertiser interest.”

While some brands are shifting spend to e-commerce due to budget constraints and the personalisation advantage, Maha believes social media advertising has a strong future. She highlighted the potential of video content, influencer marketing with a genuine touch, and the use of AR/AI to elevate user experiences. Platforms that prioritise users, embrace transparency and adapt to evolving trends will be the future leaders.

Even Khurana said, “Social media is not behind - according to WARC's latest forecasts, social media is the largest channel worldwide by advertising investment; to reach $247.3bn in 2024.” However, “e-commerce platforms provide a controlled environment where customer data can be used more effectively for retargeting and personalisation.” 

For example, the D2C Advantage X Toolkit revealed - for a campaign to drive trials of a new category in homecare, first-party data delivered 150% better efficiency and 2.2x higher CTR (click-through-rate) vs second-party data.”

Srivastava looked back on the significant 2023 results: “E-retail platform advertising accounted for Rs 9,149 crore, which was 22.49% of the overall digital media spends. This segment has grown with a strong CAGR of 24.86%, highlighting its dynamic nature. The direct-to-consumer (D2C) strategy has gained significant traction, especially in personal care, beauty, and wellness categories, as brands adopt a digital-first approach to meet customer needs better and drive market penetration.” 

Though social media advertising is not disappearing, the majority of industry experts believe its dominance is likely waning. 

Experts like Kushal Sanghvi, a business mentor, predict that social media's share of the ad revenue pie might stagnate or decline slightly. Platforms need to adapt and offer real value to users to remain competitive. Noticeably, the State of AI in Marketing report finds that 44.86% of marketers are already using Gen AI tools to drive personalised recommendations. “Social media platforms that adapt to these trends and offer innovative, data-driven solutions will continue to be essential in the advertising ecosystem”, said Khurana. 

Sanghvi further elaborated on the strategic considerations driving the shift towards e-commerce advertising: "In today's digital age, customer acquisition costs are constantly spiralling and, combined with reducing customer retention, brands are facing formidable challenges across customers lifecycle. They are responding strategically by leveraging trust through influencer collaborations, a marked departure from the traditional approach, particularly in an online environment where ad-fatigued consumers allocate a substantial portion of their time." This underscores the importance of e-commerce platforms in reaching and engaging consumers effectively in a competitive digital landscape.

The future of advertising might lie at the intersection of e-commerce and content. Sanghvi predicts a growing role for retail media, offering brands the unique opportunity to target users based on their purchase intent and browsing behaviour within e-commerce platforms. This targeted approach allows brands to reach users who are already actively considering a purchase, potentially leading to even higher conversion rates. 

As per Khurana, “Investment in open-source technologies and industry collaborations can also democratise access to advanced tools and analytics, enabling smaller players to offer competitive advertising solutions. Ultimately, a diverse and vibrant digital ecosystem benefits advertisers, platforms, and consumers alike.”