In last month’s Digital Marketing Report, we noted that Comparison Shopping Engine (CSE) growth has been strong overall, but there was a notable outlier: Nextag. For two consecutive quarters, poor ROI has contributed to Nextag’s loss of traffic and spend share among RKG’s clients.
Before jumping into our take on why this is happening, let’s review how the current CSE landscape may be affecting Nextag.
Rise of the Network
Over the last year, the CSE landscape has evolved from numerous stand-alone comparison shopping sites to a more concentrated group of large networks. Shopping.com acknowledged this in a big way when it rebranded to the Ebay Commerce Network in 2013. ECN is not the only CSE to embrace the partner network as many have been successful in growing the breadth and reach of their networks.
With the rise of the network comes the need to address the fact that all traffic is not created equally. Some CSEs, notably ECN and Shopzilla, adjust their CPC rates based on the quality of traffic. The idea here is simple: if the traffic source tends to convert well, you can pay more for it. If clicks rarely lead to orders, maintaining ROI necessitates you pay less.
CSEs know which of their partners generate the best and worst quality traffic via the aggregate conversion data provided by tracking on merchants’ checkout pages. (Tracking must be installed by the merchant and is optional but recommended).
When the (inevitable) end of free Google Product Search traffic came, the Google Shopping affiliate Beta allowed CSEs to run Google Shopping listings from their merchants’ feeds. Google became an official CSE network partner and CSEs finally started paying for their highly-qualified leads (unless the merchant has expressly disabled the Beta in the Google Merchant Center, as RKG recommends).
As CSE networks began having to pay for this formerly free traffic, they passed along the cost to merchants by way of increased rate card CPCs. In the case of Nextag who, prior to the switch, received 65% of their traffic from Google searches, this resulted in a huge increase in cost that trickled down to merchants.
At the same time, Nextag's conversion rates began to tumble as RKG merchants opted out of the affiliate Beta. While most CSEs have a robust partner network that effectively minimized the impact of not advertising on Google, it seems the collective quality of Nextag's partner sites is not as strong as that of other CSEs.
In addition, if the quality of traffic from the network partners is less than what was provided by Google, we would expect CPCs to drop on most CSEs. We’re not aware that Nextag has implemented a version of value based CPC calculation, which means that CPCs aren’t adjusted based on quality. This helps explain Nextag's frequent rate card increases as the PLA landscape has become increasingly competitive, driving up Google CPCs.
So if Google traffic - perhaps also the highest quality traffic – is being removed from Nextag’s partner network, advertisers are left paying Google CPCs for sub-Google standard traffic. We believe this is the primary issue plaguing Nextag’s performance and the cause of the drop in quantity and quality of their traffic. Simply said, unless the quality of traffic improves or the CPC advertisers pay decreases, Nextag will continue to lose share to engines delivering a better ROI.
RKG is working to test our theory and we’ll be following up with our findings.