Growing Ecommerce – The Retail Growth Podcast
Tech's Impact on Health & Beauty with Rob Davis of THG
(Recorded live at IRX Birmingham)
Rob Davis is Acquisition Marketing Director at THG Beauty, a division which is responsible for £1.2B of THG's total revenues, and which includes brands such as LOOKFANTASTIC, Cult Beauty, and Dermstore. Rob tells how growth in the Beauty ecomm sector is shaping up, and which tech and consumer trends he's watching now. Plus, we get Rob's take on economic trends including the resilience of the luxury market and mythbusting the Lipstick Effect. Lastly we get Rob's take on Google's automation and new AI features. It's a great conversation that might just change the way you view Health & Beauty.
(Recorded live at IRX Birmingham)
Rob Davis is Acquisition Marketing Director at THG Beauty, a division which is responsible for £1.2B of THG's total revenues, and which includes brands such as LOOKFANTASTIC, Cult Beauty, and Dermstore. Rob tells how growth in the Beauty ecomm sector is shaping up, and which tech and consumer trends he's watching now. Plus, we get Rob's take on economic trends including the resilience of the luxury market and mythbusting the Lipstick Effect. Lastly we get Rob's take on Google's automation and new AI features. It's a great conversation that might just change the way you view Health & Beauty.
Welcome to Growing eCommerce. I'm your host, mike Ryan of Smarter eCommerce, also known as SMEC. Today I am in rainy Birmingham, england. I'm joined by Rob Davis of the Huck Group. He specifically works for the beauty division of the Huck Group. They've got over 1,300 brands. It's an absolutely massive operation. Rob has been in paid search and biddable media for over a decade I can't remember how long long time so we've got a lot to learn. We're going to talk with Rob about development of the health and beauty sector, the impact of AI and automation in this branch and what he's watching macroeconomics like. Why did it take so long for luxury to collapse? Is the lipstick effect real? These are all questions we're going to look at. So thanks for listening and remember if you enjoy this podcast, please leave a review. Share us with a friend. We really appreciate it. All right, let's get into it. So why don't you get started with a quick introduction? What are your skills? What themes interest you, rob?
Speaker 2:Yeah, of course. So my name is Rob Davis. I'm the Marketing Acquisition Director at THC Beauty. I've been in the industry for about 17, 18 years now, since 2007. And so my skill set evolved, mostly through paid search and PPC and I guess over the years that has evolved and more recently the remit that I have encompasses more of a wider scope. So, looking at paid search, paid social, affiliate marketing, so anything that is biddable effectively, so that would encompass things like video display programmatic on top. So that would encompass things like video display programmatic on top.
Speaker 2:So I guess the evolution of my career in digital marketing started off with an actually random job that I got, just as out of luck, I guess. So I was working for a call center and then I got called in and was was told there's a there's a campaign with Microsoft advertising and they were interested in hiring somebody to come support their inbound service services for small, medium-sized enterprises. And so I learned all about digital marketing, ppc through Microsoft ad center at the time, which then evolved into live and Bing and then ultimately Microsoft Advertising. So I worked there for four years and learned the ropes, I guess, about PPC, fell in love with the industry because I thought that the amount of data, the transparency that you have in terms of what metrics and KPIs you can monitor, and how immediate the response was when you were changing something. If you updated your ad copy or if you changed your bid strategy or if you added new keywords, you could literally immediately start to see some impact on performance or um or leads or whatever the industry you're working in, right um, and so I really enjoyed that, and I also knew that in order to develop the skill set that I was hoping to achieve and also broaden my knowledge, I would have to learn Google. So I went to a back.
Speaker 2:In those days you had to pay for a Google certification. So, out of pocket, I went and did an online Google certification and got the certificate and then was able to apply to agencies. So I went to an agency in the northwest of England small boutique, mostly focused on website optimization, but they had a PPC arm to it and I yeah, I built up more experience and more knowledge about how to manage client accounts directly and continue to get deeper and deeper into the rabbit hole of PPC right. And so, as I moved through the years working at different agencies, I then decided to work at a marketing tech company over in Germany and that was another different perspective on the whole industry, where you're working not just on the client relationships and managing accounts but you're also working on developing technology that could help to improve performance again, optimization, specifically around PPC. So that was a great way of understanding the complexities of the technical side to this different system. So we work with Google being the main one and having to keep abreast of all of those developments in terms of features and also consumer behaviors that are occurring. So that was a really, really interesting part of my life really living in Germany and working at a tech company.
Speaker 2:And then over the last four years I've been at THC Beauty. So I moved back to the UK and that was then kind of a move in-house right, that's what the agency would say and so I moved in-house or started to work directly with the teams, and that again gave a new perspective. So that was the first time working with a team that you know obviously built ourselves and we worked in-house, and that's something that gave another new way of thinking and seeing how businesses operate in this space of e-commerce, retailing with a real slant and specialism in digital marketing. And so over the last four years, my role's really been working on developing a strategy, building out a team, looking at how we can continue to stay ahead of the market and also take advantage of all the features and tools that are being developed.
Speaker 2:So, yeah, the industry seems to be changing all the time, and when it comes to themes and skills and things that I think I'm most focused on at the moment, it's probably measurement, I think, as a really key, big one.
Speaker 2:Then it's going to be about automation and ai, which I think, which has been growing and developing over the last couple of years, but it's probably just about to explode over the next two or three With the measurement. That's been around a bit longer, but as a business, we've only really started to take that, I guess, a little bit more seriously in the sense of looking at multiple perspectives of measurement, multiple ways of attributing data to marketing channels, in order to be able to give yourself a more holistic perspective on what is true value, right and how, where's it being driven for, where's it being driven from, how different marketing channels are interacting with each other and those relationships. So that's something that I find, yeah, fascinating, just personally, and it's also going to be a big focus for us. So I think those are the two big themes and as we go through the year I'm sure new things will probably come out of the woodwork that we'll have to deal with as well.
Speaker 1:Yeah, undoubtedly. I mean, the pace of change has been wild the past few years. Yeah, I love this perspective that you bring. You've been platform side, agency side, MarTech side and in-house. It's just a really full perspective that you have. Yeah, and what you said there at the end, like about measurement and attribution, that's what I love that. You know, I feel like none of these single views are perfect and they're just these different kinds of lenses that we can look through and try to kind of get to the bottom of what's going on.
Speaker 2:Absolutely. I think there's a really big part of you know a business's success in accurate measurement and, like, the foundation of good data is always the key. And so you know, I think you know the company that Ihc at the moment is, um, it's got a very robust data integration. So we are a vertically integrated company. We own everything in terms of platform, the, the website, the fulfillment, warehousing, all that it's all built within our own platform and so we have access to all of this data in terms of all of the metrics that you might be interested in using or monitoring when it comes to measurement. So I think that foundation is really important. But then what we are maybe a little bit underdeveloped with, I guess, is how do we bolt on a different measurement model onto these, onto this data?
Speaker 2:Traditionally, I think a lot of companies do this they look at things from a last click point of view and they'll attribute value at last click, which is probably a bit of a dinosaur nowadays. It's a kind of a classical method of measuring. It is robust, you know, it is clear and it's quite straightforward because it's it gives everybody a fair chance at attributing the value. But what we know, and I'm sure everybody else does is that a lot of channels get undervalued because of this last plate model, and so having either a multi-touch attribution model or looking at MMMs, for example, I think those are where you can get more of a triangulation of true value. So you should never really use one or another. I think the key for us is gonna be using them all in unison so that we have complementary models that you can use to understand value, and the human element of this is going to be the final decision. So if you, for example, have a marketing channel that only one of your measurement solutions are saying works well, but all the other ones are saying it's actually not working that well, you're probably going to trust the majority of your measurement solutions saying that it might not be as valuable as this one thinks it is. So you can't take one or another as read, but you can use the collective to make better decisions when it comes to your marketing investment.
Speaker 2:And so I think that's where, yeah, we're gonna're going to have a lot of fun putting into place a lot of different measurement solutions. We've made some great progress on that, but I think, yeah, it's going to be key for most businesses really to nail down true value. I guess what we're seeing is the customer journey is evolving all the time as well, so we get different user behaviors that are occurring, especially with the advent of, like social media and influencers and live shopping and those kinds of different aspects to a customer journey than we had in the last few years, and I think that complicates things in the sense of where do you put value and which marketing channels are actually going to be driving the? You know the incremental value for you. Yeah, it's a huge theme. You could probably spend the whole podcast talking about that on its own, to be honest.
Speaker 1:I'm tempted, but before we go on I've got like. So you mentioned you're in the beauty division, is that right? So like, tell us just quickly about the structure of THG. There's like beauty nutrition, or how is it broken up?
Speaker 2:That's right. So THG as a group is multidivisional. So we have our beauty division, nutrition division and then the ingenuity division. So the ingenuity division is, I guess, the engine of THG. It's the software, it's the technology, it's the platform that has been developed and that's about that vertical integration. That's the vertical integration, so it's the full end-to-end solution for enterprise clients. That software and solution is then sold to our clients and they can use different aspects of that as a service. And we've also then got two full divisions within our own THG group which are bolted into the platform capabilities and then fully owned as retailers within the group.
Speaker 2:So THG Beauty, being one of those, is a collection of pure play e-commerce retailers with a global reach.
Speaker 2:There's Look Fantastic, cult Beauty, dermstore, skin Store, ry. There's also subscription services within THG Beauty, such as the glossy box, fantastic beauty box, and we've also got manufacturing capabilities with production facilities in different locations globally where we can produce our own and manufacture our own beauty products. And then we've also got a selection of own brand beauty brands which are fully owned and run and operated by THC Beauty itself, with B2C websites etc. I think overall we've got an inventory of about 1,300 brands that we can distribute to 195 different countries around the world, to 195 different countries around the world. And there's also, from Look Fantastic's point of view specifically, which is the largest out of the beauty pure play retailers. There's 660 brands and there's 30 localized websites with fully translated languages which we've again can operate to about 190, 195 different countries. So there's a large operation, um, and yeah, ultimately, the idea is that we are the go-to retailers for both our consumers and our brand partners. When it comes to, you know, growth, we're seeing pretty significant growth over the last four or five years.
Speaker 1:Yeah, just talking about that point on growth there. I mean I was looking at Salesforce data. They have the Salesforce Shopping Index and it's based on all the e-commerce running through Salesforce platform. But they say that health and beauty is growing faster year on year compared to like an overall e-com average. I'm just wondering, I mean, how do you see growth in the segment right now? Do you think is it because year on year is it just strong compared to a bad last year, or is it kind of inherently strong? Actually strong? What do you see?
Speaker 2:How robust do you see the industry? Yeah, it's an interesting industry, right? Because it kind of seems to be going against the grain of a lot of the other industries and I guess, when we look at it, what I see personally is the health and beauty market growing at around a stable 2% to 3% year on year of had a bit of a tumultuous time through the 2020 use and 2021s because of, obviously, the pandemic and lockdown, meaning that the high street retail had to close down. So ultimately, the industry as a whole did see a little bit of a drop, but, between you know, 2020, 2021, but since the high streets reopened it's back to stable growth. We do expect that to continue in about 3% growth year on year.
Speaker 2:Now, from an e-commerce pure play perspective, I think there's an advantage in terms of the growth here because we see, yes, it's growing at a stable two through three, but we're also seeing the penetration of online sales as a mix or share of voice right of the total is also increasing at about the same rate. So e-commerce, I think, is doubling in terms of its growth compared to the offline retail of health and beauty, which, because it's losing share of voice and only growing at two and three. It's probably stable or potentially stagnating, whereas online is where the growth is coming through, and I think that's due to a number of different factors, right, I think there's there's a lot of play, a lot of different reasons why those things are happening.
Speaker 1:But yeah, I mean, it definitely does seem to be different, less affected, let's say, than a number of other verticals within e-commerce yeah, I mean, like you just mentioned, that there are different reasons why that might be occurring, like which, which trends, which consumer trends are you watching, or are there particular categories within like yeah, I don't know, maybe like more eco-friendly products, sustainable, or more like where do you see this action occurring?
Speaker 2:Yeah, I mean you mentioned a really good one right the more sustainable and the more economic the products, the packaging. That's something that we're really seeing consumer sentiment move towards. So people are becoming a lot more eco-conscious. So people are becoming a lot more eco-conscious and I think that's impacting and incentivizing a lot of businesses within the industry to think a little bit more seriously around. How are they managing to use recycled materials within their packaging, to reduce packaging waste, to make recyclability more appealing and more easy to achieve for both the consumer but also for the industry itself? I think that's a huge trend that a lot of businesses understand the impact, obviously from both an ecological but also a consumer kind of sentiment point of view, kind of sentiment point of view. Then other trends, I think consumer trends like um, we see a huge amount of interest in like I mentioned this earlier but like live shopping, and so you know something that is more of a kind of customer behavior, shopping behavior, um shift and it's kind of driven by gen Z and Gen Alpha, even right in terms of like, where that's coming from. So it's kind of linked to the whole influencer piece too. But yeah, we've definitely seen a large growth in activity of people using, like TikTok, lives, facebook Shops, etc. Where there's live videos with either influencers or um, or, you know, social media managers presenting products, um, and, and that's something that's really grown quite quickly, so definitely keeping an eye on that.
Speaker 2:And then also, another big one is and I mean everybody's talking about it, you know it's AI. How do we as a, as an industry within the health and beauty, adapt to um AI, augmented reality, try it on at home kind of situation where you know, obviously the high streets advantage when it comes to beauty is that you can obviously try on the makeup, or you can try on your foundation, or you can smell the fragrances in the department store, in the shop, and that's something that you know as an online e-commerce retailer. That's very difficult to compete against, right? So how does the beauty industry leverage those augmented reality tools and and and um the ai features that are now becoming available to give consumers the ability to potentially try foundation and see whether it's matching their skin tones or do they look better with a different type of lipstick on, for example, and I think there's the tech capabilities to do that now, and that's another trend that we were definitely interested in. I think a lot of a lot of the big key beauty players are investing more and more into that. So I think that's going to develop and explode probably over the next couple of years as the technology becomes more widely available and we can start to use those kind of features both in our marketing outside of the website to bring people to the site, but then also on the website with a bit more of a comprehensive solution for people to figure out what it is that they want.
Speaker 2:So, I think, tied to AI and AR, so there's the kind of the cosmetic side to it with trying it on. But then there's also the trend of AI, which is the big data side of it, and how do you find trends in the customer data from a first party point of view? How do you improve your marketing capabilities through smarter decision-making? Or how do you test multiple variations of ad copy by using AI to create new assets for you in a whole bunch of scale, right? So I think that's something that we're also really interested in understanding more about and, as a business, surely it is going to be a large part of like our testing roadmap going into the future. It's like how does AI play a part in both the creation of assets, but also then the number crunching of all the data and pulling out insights and I think that's something that you know when we work with marketing tech partners.
Speaker 2:That's where we're also really excited to work with people who have similar kind of visions for where we can improve and leverage that data in the best way.
Speaker 1:Yeah, I mean thanks. I want to call or just pull out quick a couple of things. They're like I love the Gen Alpha. Call out for one because, yeah, the older Gen Alpha. They're like I love the gen alpha call out for one because, yeah, the older gen alpha, they're teenagers now. So of course they'll be starting to get into beauty, cosmetics and stuff like that. Um, but that I think we've all been so fixated on gen z for a while. It's kind of a reminder to listeners. Actually gen alpha is growing up and that's going to be the next big kind of wallets coming online. It'll start being gen alpha.
Speaker 1:Um, live shopping. I've, I'm, I'm kind of a live shopping bear, let's say um, but maybe it's just too foreign to me. But I feel like in beauty and cosmetics there is I mean, there's, there's been so for years. It's just kind of a natural evolution of the influencer marketing that's always been going on. People like having that kind of a trusted, you know, peer or older sibling type or whoever like that kind of a, an image, someone who can help them make a decision and then to integrate shopping into.
Speaker 2:That makes sense to me, makes a ton of sense in beauty um, I think trust is the key word here, right, because I think traditional advertising right, it's got this, this barrier, especially with the younger generation.
Speaker 2:People just do not trust it anymore yeah they don't believe the things that advertisers are saying, because they see how words and ideas can be twisted through smart advertising, whereas with influencers, I think there's this layer of trust and willingness to believe in a real person who they've been watching, they know they probably follow them and watched hours and hours of them talking about things and they believe that if they do promote a product that they actually think it's good, right. So I think that level of trust is what the key driver of influencer marketing has been and that's why it's so successful.
Speaker 1:And you hear about like de-influencer and like these kind of new trends lately where you know even influencer marketing. Some audiences are getting skeptical of that, but I think if there's a trusted person and there are these kind of parasocial relationships and these effects that occur, that'll keep driving that. I could keep talking about this because I'm also curious, too, what I find so interesting about this whole macroeconomic. For the longest time, will there be a recession? Won't there. Is this a recession? And we didn't realize it, et cetera? But somehow luxury was a powerhouse that kept pushing through and pushing through, even though you would expect that category to get damaged earlier on. It's finally, in the last three quarters or so, dipping Like why do you think that happened? Why now and why not sooner? And are you feeling this in? You know, luxury is a subcategory of beauty as well. Do you see this in like high-end beauty products too?
Speaker 2:Yeah, I think there's so many different impactors and variables and reasons why luxury goods. Overall, if you think of the wider market of luxury goods, I think this last year or half a year or so, like you said, there's been a bit of a drop off and you know I've read my fair share of articles saying that you know, and you know I've read my fair share of articles saying that you know it's kind of come to its end in terms of its growth and it's probably not going to pick up for a while. I mean, I think there's a lot of different headwinds in different areas right across different markets. In the US and the UK probably hit equally badly right in terms of, like, social economic pressures, cost of living crisis, inflation, def, deflation, all that kind of stuff, right, and I think that's where the combination of all those different things is putting a lot of pressure on that specific luxury consumer goods kind of bracket or layer within, you know, the overall market.
Speaker 2:So, particularly when it comes to, like, appropriation of wealth, and is there, you know, and is there an increase in movement of wealth to the top one 0.1% of all people and therefore, more broadly, there's a, there's a, there's less share of wallet for those things across a broader spectrum of the population, right? Could that all be kind of feeding into the reasons why over this last year that's all starting to kind of kick in and the dominoes are starting to fall over a little bit. So I mean, I don't know, I'm not an econometrist. Is that the right?
Speaker 1:word Economist, economist, economist, yeah.
Speaker 2:So that's potentially why we see the fall in luxury consumer goods. But when I just look at it from a beauty lens, in terms of luxury beauty products, we haven't seen such a huge impact in people's purchasing decisions when it comes to the higher premium end of the the ranges in terms of skin cream, anti-aging, you know tools and electronics, etc. I think they're still it seems as if, you know, still quite a large market there for, uh, for, within the beauty sphere of this whole thing. There's probably a couple of reasons for that too, like we talked about before, with beauty potentially being slightly immune to some of these larger macro trends that are occurring, you know, from a economical point of view.
Speaker 1:Well, I mean, let's talk it, let's look at the other end of the spectrum on these products, because there's like a well-known economic effect. They call it the lipstick effect. Um, I mean, can you tell us about the lipstick effect and sure, and also maybe myth busted for it because you sell lipstick. So do you see the lipstick effect in practice?
Speaker 2:yeah. So I mean it's it's an interesting thing because a lot of people have been talking about it and obviously it's. The lipstick effect was coined by Leonard Lauder, the founder of Estee Lauder, and it effectively means the idea that in economic downturn, people will still actually increase their purchasing behavior on affordable luxury goods. So, like you said, the lower end of the luxury goods, kind of like, yeah, funnel, that's where they will actually increase investment and increase their spending on things like lipsticks, right. So I think there's um a time and a time-tested kind of proof of this, as, over the years, if you look at like recessions and lipstick sales, they're like inversely correlated, right, and I think that's something that we we did see from 2020 across 2023, 2024, and I, and I think you know there's again probably impacted by the you know the economic downturn that we've seen, but I believe that it was also impacted by a number of other factors. So it's not like a pure lipstick effect, if that makes sense, based on the downturn economically. It's also to do with the fact that we see the impacts of lockdown and the pandemic. I think that was something that we've never really experienced before globally in the modern world and I think that's something that was so unique and it had so many far-reaching impacts across every industry, every aspect of people's livelihoods and lives.
Speaker 2:I think when we just look at it in this tiny little niche of you know, beauty performance and purchasing behavior online I think there was um. It was also part of the reason that beauty did see growth coming out of 2020. Yeah, especially online. As people switched from the high street, they had to buy these things online with the layered in impact of the lipstick effect. They were buying these little affordable luxuries, but they couldn't buy them on the high streets. That's why they go to online e-commerce beauty retailers and that's where I think we see that growth. But it's not just one thing. It's kind of a whole multitude of different impactors and reasons why. But, yeah, it's definitely something we have seen, but I don't think it's like your traditional lipstick effect as you might have seen in the 80s, 90s, etc.
Speaker 1:The gears are turning in my head. I'm definitely going to dig in the data and try to make a chart out of this one time not just out of curiosity, but, um, but you know, I just kind of imagine you were talking about the pandemic.
Speaker 1:It almost feels like the pandemic would be really good for beauty and cosmetics because, like you know, it's called face time, after all, and people are zooming in stuff and you could be dress code got a lot more casual. Um, you could be wearing your pajama bottoms and a fancy top, no one would know the difference, but your face is always on camera. It seems like it would be almost great for that industry in some way.
Speaker 2:Yeah, I think you're right. I think a lot of people were conscious of the way they looked, even though they were at home. Whenever you're on a video call or a conference call with colleagues or friends or family, you always see a little picture of yourself on the screen right, and it's almost impossible not to see yourself right, it's like it's hard not to look at.
Speaker 2:Super annoying, yeah so, yeah, I think there is definitely a um. Yeah, there's definitely going to be some sort of impact of, like people's consciousness of whether they look okay or they feel like their hair's been cut properly or whatever. Right, I think that's something that, yeah, the majority of the population probably were impacted by um. And I think when you look at things like fragrance and perfumes, which you might have expected to have the opposite of effect with people working from home, I think when the high street reopened and people went back into their workplaces and the lockdown kind of ended and we all went kind of back to normal, I think we've seen an upsurge in perfumes and fragrances as a result.
Speaker 2:So if you monitor the different category demand trends, you can actually see kind of different moments that these categories have their heyday right. So, like hair care actually massive during the pandemic, everybody's worried about their hair being on camera, right, whereas not so much baby perfumes and fragrance. But since lockdown ended, then you see that category increase right, and there's constantly these dynamics in the customer behavior and where the demand is coming from. So I think you know most businesses have to keep on top of that and they have to keep up to date with what's changing, because it does change really, really quickly. Seasonalities, or you know consumer trends, or you know changes like the pandemic, or coming out of the pandemic, high street opening, closing, et cetera. They all seem to have big, dramatic influence on different categories. So monitoring it is half of the problem. And then how do you actually adapt to business to take advantage or to shield yourself from some of these things, yeah, doing something about it.
Speaker 1:I mean you were mentioning earlier automation, AI, things that you're watching. I want to just dig back in that for a minute, Like what is your experience of Google's technology changes the past couple of years? You've got a long perspective on Google's ad tech. What do you make of automation the last couple of years?
Speaker 2:Yeah, I think it's really interesting because it's changed a lot and I think it's kind of two-pronged right We've got, if I look back over, let's say, the last five, six, seven years, we've had the advent of so many algorithmic learning when it comes to campaign optimization, right. So this is kind of the advent of smart shopping campaigns and then ultimately, performance max campaigns, and I think all of those over the last five, six years have really changed the landscape of how marketers are both involved with performance management of their campaigns but also how they have to adapt to it as well. So I think from a two-pronged perspective, if I look back to prior to all of these, you know new fancy machine learning kind of features within the Google ecosystem. I remember a lot of bulk editing, manual adjustments. You know crazy campaign creations to make sure that you've got query matching working correctly, uploading spreadsheets of big changes to campaigns, to team adapt your bids up and down right, rather than pick a box and let it do it all itself. So there's like a massive paradigm change in, like how digital marketing teams have to be set up in the first place, right. So you kind of had a different responsibility back then, different skillset needed, whereas nowadays the shift into hands-off black box performance management, performance max.
Speaker 2:I think it's brought with it both advantages from a scalability point of view, because it can just handle as many keywords, products, categories as you can throw at it right, whereas in the past that would be quite difficult.
Speaker 2:You need like tens and tens of team members to manage all of that. And so, yeah, there's there's definitely the benefits of making google, google search advertising more scalable for more businesses, but then it's also brought drawbacks and I I think, when I look back five, six years ago, that control over every single different, particularly pinpoint times of day or particular geo-regions, or turn keywords up and down as and when you want them, or manage things on a much more granular level and also understand the data and measure it at a much more granular level. I think a lot of people who are still quite old school miss that ability and that's where I think the downsides come, maybe when we look at Performance Max right when it's a bit more black box. Quite old school missed that ability and that's where I think the downsides come, maybe in when it comes. Look at performance max right where it's a bit more black box.
Speaker 2:People have to look at reports which give them just overviews of things, but you can't dig in and drill down I think that's frustrating for a lot of people and I think that, um, there's there's also the feeling, or the perceived, lack of control over performance, because nowadays you put in a CPA target or a return on that spend target or an ROI or a lead gen whatever particular target that you're going for, and that's it right. You set that and then you almost forget about it and you let the algorithm do it, and I think, when it comes to performance management and optimal performance management, there is a bit of a middle ground that you need to find. So when we kind of all migrated to Performance Max over the last couple of years in retail, it was kind of like a new advent of this technology. We went through like a bit of a roller coaster in terms of like is this going to work? And we had a long period of time rolling it out and getting it stabilized. However, because it's still relatively new, I think there's still a lot that we're going to discover about best practices. So how do you stretch your campaigns in the right way, how do you adapt your bidding and how often? And then, what kind of reports should you be looking at and how do you use them to then leverage the actions that you want to take. So there's loads of different aspects to it that we will still need to understand over the next couple of years. A little bit like when Google rolled out paid shopping ads back in 2012, 13, something like this a long time ago and that was like a new thing, right, and it took people years to figure out how to actually optimize it and get best practices in.
Speaker 2:I think that's going to be the same kind of thing with Performance Max. There's a lot of very smart people looking at this and there's a lot of new ideas and a lot of new ways that people see as being able to hack the system a little bit and find wins where it looked like there weren't any. And then you take all of that and you combine it with the fact that Google will continue to need to develop the platform. They'll keep throwing out curveballs and they'll keep developing new features, and AI is going to get more integrated and you're almost seeing it evolve into an even further kind of like hands-off approach where you almost just seed it with your business and tell it that this is your website and then it kind of almost goes away and does everything yeah, itself, right, and I think you know feed-based and you know the the, uh, the eventual death of keywords is inevitable as well, and that will probably happen.
Speaker 2:I don't know five, 10 years down the line where, rather than using keywords that will, just, you know, use your website almost like a DSA campaign, but managed to build out the relevancy query matching from that, using, again generative AI and sentiment and all that kind of stuff. So there'll be new things on the horizon that we'll have to continue to adapt to. Uh. So, as soon as we feel that we've cracked performance max, I'm sure they'll come out with something else that will, you know, throw a curveball in there.
Speaker 1:We'll have to figure out a new solution for that what will they call it, though it's hard to get a more dramatic name than Performance X. But yeah, great stuff in there. I mean totally. I think there was with this manual offer. You're right, it wasn't as scalable back then, but there was a level of promotional control that was available. That was available and also that kind of translated too into kind of tactical arbitrage. You could kind of do ads better than competitors and it was kind of easier to then perform better and find these pockets of efficiency and stuff like that.
Speaker 1:Now everyone's on the same tech and it's a bit harder to kind of use it differently than other people. But, as you said, it's still early days and, by the way, last night was here in European time it was nighttime, I guess it was just morning in California. But last night they had Google Marketing Live and there was this very funny moment where they had a slide come up that said you know more reporting and control coming to Performance Max and the crowd burst into spontaneous applause. That was definitely not planned and not anticipated by Google, but it showed you how much people like that was the biggest applause of the whole night was more reporting and controls for PMAX.
Speaker 2:And I think I mean I looked through some of the notes or the releases that they're looking at bringing through and, like you said, there's kind of both the measurement pieces with a bit more transparency, a bit more availability on the data, I think specifically on like YouTube placement reporting et cetera. Right, where there's a bit more control over where are your ads showing on YouTube from a performance max perspective, which is massive, I think that's going to be really useful. But it's still only part of the way there that we really need to get to in terms of transparency. And then it seems as if the other aspects were mostly to do with AI, right, yeah.
Speaker 1:Loads and loads of AI, I mean in demand gen campaigns. Regarding youtube placements, I don't know if this was even discussed last night, but, but recently, like, you'll be able to choose do you want in stream, do you want what kind of? Where do you want to be? And um, but yeah, last night there was a lot of ai and I mean, to me it felt, um, like there wasn't actually that much new. It felt like they're kind of I feel like last, last year, at this event, they announced a lot of AI and it was kind of like I don't know, it's kind of like a crocodile swallowing a deer or something like that. They took a big bite and now, a year later, they're still kind of digesting that. And there'll be shopping and search ads coming to these new ai overviews that they talked about lately at google io. Yeah, um, and and in a way, that's sort of just a fulfillment of things that they were talking about a year ago, but it takes time to.
Speaker 2:This is a big shift in the way google works yeah, I mean, I think this whole kind of like trying to make the search results a bit more interactive, I think it's a natural progression that Google has to take. So you've got Microsoft with the co-pilot right and integrated with GPT. I think that's where Google have actually taken a bit of the upper hand in terms of, like, search engine. Sophistication makes it a lot more interactive, a lot more engaging, um, and I think what google are trying to do is catch up to that and having a more interactive overlay with, uh, you know, videos or call outs or, like gen ai, related information based on questions or topics or search kind of queries. I think that's going to be the natural progression for it and it's only going to continue from there.
Speaker 2:I think that Google is also now kind of competing from a search point of view with the likes of short video platforms, right. So, douyin, tiktok I think there's a lot of the younger generation using TikTok over and above Google for searching for answers to things, and I think short video specifically is becoming more and more prolific when it comes to answering questions or shopping. Also, e-commerce is also massive, so they've also got to compete with a completely different user experience, a completely different method of searching and that's something that, like they're already doing, it's probably going to evolve with more interaction, potentially have more videos integrated, youtube shorts making an appearance right In terms of answering questions Definitely. So there's going to be all sorts of changes YouTube shorts and like, make an appearance right in terms of answering questions definitely so.
Speaker 2:Like there's gonna be all sorts of like changes that um, yeah, we'll probably see over the next couple of years and I think everybody's trying to adapt. Like when you look at the big players, they're all trying to adapt to how do consumers search? Um over the last? I've heard it for the last 10 years, but, like voice search, I remember Google talking about it for ages with the voice search capabilities in Google, but it never really clicked. It never really caught on. But I think those kind of things eventually will, and I think with the advent of AI it's going to be more of a conversation will. And I think the advent of AI it's gonna be more of a conversation rather than a like, a interaction you might have with a Siri or an Amazon Echo or whatever. Right, I think that's something that will again evolve and we'll see really interesting developments in that space over the next five, ten years or so yeah, I agree, I think, you know, people tend to think about Google Search and Google Shopping as being really demand capture, bottom of the funnel.
Speaker 1:But these searches they're kind of an expression of interest, not necessarily intent. People are still very much browsing and so, you know, using AI features to support browsing, to support discovery, I think it's a smart move. Yeah, true, but let's see, rob, I think we're just about out of time here. So thanks so much for joining us today and sharing all your thoughts with us. Any final words or anything you want to shout out?
Speaker 2:I just want to say thanks for inviting me on. It's great to be here at the IRX in Birmingham with you guys and, yeah, shout out to the team back in Manchester and a shout out to my family. But yeah, it's been great. Enjoy talking to you. Cheers, mike, thanks, thanks.
Speaker 1:Thanks for listening to Growing E-Commerce. If you enjoy this show, please share it with a co-worker or a friend. Share it on LinkedIn and you can learn more about Smarter E eCommerce at smarter-ecommercecom. Now, if you'll excuse me, I have got a session here at IRX Birmingham and I've got to go prepare for that. Thanks again.