Building up its retail media operation to compete with Amazon, Wayfair launches sponsored products
Online furniture retailer Wayfair is opening up sponsored products to all, the latest in the company’s attempt to build out its advertising platform. The company is also now hiring for a director of product management for media.
The platform, called Wayfair Media Solutions, has existed for a couple of years. But the launch of sponsored products means a new way for Wayfair to compete with other marketplaces like Amazon. According to a document explaining sponsored products, brands can bid to promote certain SKUs within certain categories. The pay-for-performance set up means they play for clicks. The tool is self-service. It went into beta in September and is now available to everyone.
The job posting gives some indication of how the brand is thinking about growth in the space. The brand says it is “aggressively” investing in its “media” space, which includes onsite advertising, sponsored products, custom sponsorships and brand sponsorships.
Wayfair’s approach is unique, according to ad buyers, because it’s building much of its technology in-house. The company has 1,300 engineers and data scientists. Most of its advertising technology, including campaign management and bidding algorithms for online advertising, was developed in house. Two buyers said sponsored products CPMs are between $3 and $4.
Wayfair did not respond to a request for comment.
Like Amazon, Wayfair classifies media revenue under “other” categories in its financial reporting. That revenue was $13 million in the third quarter of 2018 and $42 million in the year to date last year.
One buyer, who is currently working with a brand to buy ads on Wayfair, said that while Wayfair’s scale remains much smaller than Amazon, Wayfair’s similar ability to connect advertising with intent with actual sales is attractive. Wayfair’s also managed to crack one area Amazon hasn’t quite entirely swallowed: furniture. That makes it more attractive to brands in that area.
“The impact Wayfair has had on the industry as a retailer is important,” said Will Margaritis, who heads e-commerce at Dentsu Aegis. “Amazon has always struggled with the home. Wayfair found this niche in which no one could do well online.”
In a media kit, Wayfair says it has more than 39 million monthly unique visitors across its brands, with 68 percent female users, and 31 percent of them making more than $85,000 in household income.
Offerings within media solutions include the new sponsored products, as well as personalized brand pages and display. Like Amazon, it also includes an offering that follows customers with targeted ads off Wayfair.com.
Wayfair’s experience with growing its ad platform seems to be very closely mirroring Amazon. In an earnings call last quarter, CEO Niraj Shah said that the return on ad spend for the supplier in the beta test had been high. Still, he said, it’s important as retail to not have it negatively impact customer experience — a consistent balancing act for retail media operations that don’t want to overstuff search results with advertising when users come in to make a purchase. Advertising can be lucrative, with high margins, noted Shah, but it can also ruin the experience.
“The reality is we think [sponsored products] will take a little while to ramp up,” said Shah. “So we obviously – there’s volume there and it grows, but the volume starts relatively small, and I think the real economics for everyone involved get good as it ramps and so we’re in a ramp phase, but I don’t think of the ramp as not in a quarter, but as many quarters. And as it plays out through next year and forward, I think we’ll start seeing it be a meaningful contributor.”
More in Marketing
![](https://digiday.com/wp-content/uploads/sites/3/2024/01/money-sandwich-digiday.jpeg?w=439&h=277&crop=1)
Omnicom is consolidating B2B shop Doremus+Co with Merkley and Partners
The move is part of ongoing consolidation throughout agencies and holding companies as holding companies look for ways to drive efficiencies and boost revenue.
![](https://digiday.com/wp-content/uploads/sites/3/2024/07/creator-athletes-digiday.jpg?w=439&h=277&crop=1)
After keeping them at arm’s length, sports brands are opening the door to creators
The PGA and soccer club Juventus are taking a more progressive approach to creator-based marketing.
![](https://digiday.com/wp-content/uploads/sites/3/2023/04/DigidayCar.jpg?w=439&h=277&crop=1)
Car brands from BMW to Volkswagen lean into in-car gaming
The long-term potential for in-car gaming extends far beyond the relatively brief moments in which drivers are charging or filling their cars. As more vehicles become fully autonomous, drivers’ eyeballs no longer have to be focused on the road, turning them into a potential target for advertisers.