Brief:

• Google released an advertising format for YouTube that lets retailers turn their video ads into shoppable experiences for viewers. The direct response format has a "shop now" button and can show products from a catalog to buy instantly from a retailer's website, according to a Google Ads blog post.
• Aerie, the underwear brand owned by American Eagle Outfitters, tested the format and generated sales conversions that were nine times better than its traditional media mix. The brand also a saw return on ad spend (ROAS) that was 25% higher than a year earlier, per the blog post.
• To use the ad format, retailers need to synchronize their Google Merchant Center feed to their video ads. Google also added "Video action" campaigns to help retailers drive more conversions on YouTube.

Insight:

Google is showcasing the shoppable ad format for YouTube as digital media outlets prepare for this week's NewFronts sales presentations hosted by the Interactive Advertising Bureau (IAB). With many retailers looking for ways to boost e-commerce revenue as the coronavirus pandemic limits their brick-and-mortar operations, YouTube is adding the direct response (DR) format to help merchants convert viewers into shoppers. The DR ad formats make the platform far more flexible for brands, including direct-to-consumer (DTC) startups that are disrupting a variety of industries.

The shoppable format comes as brands increasingly demand their advertising show business outcomes including direct sales and leads. For brands that sell bigger-ticket items like automobiles, YouTube lets them add lead forms to their video campaigns. Carmaker Jeep tested the format in South Korea and boosted completed leads by 13 times at an 84% percent lower cost-per-lead, according to Google.

YouTube's additional DR features come as parent company Google makes a major push into e-commerce as it faces growing competition from rivals like Amazon and other online retailers that are encroaching on its paid search business. Google's strategy is all-encompassing, including the addition of more shopping features to its Google Pay payment app as part of a major overhaul. The company in April stopped charging merchants a fee to list products on its Google Shopping search pages, several months after it added a shopping section that lets mobile users see a variety of clothing and accessories products from multiple online stores.

YouTube has become a key source of sales growth for Google and its parent company Alphabet. Its ad sales jumped 33% to $4 billion in Q1, much faster than the 8.7% gain to $24.5 billion for Google Search, a more mature business that's Alphabet's biggest revenue source. During the company's earnings call, Alphabet CEO Sundar Pichai said DR advertising has strong growth potential.

"On YouTube direct response, we've definitely seen traction there. I think an area where it really works well, for example, is app installs. Tha's a great example of it," Pichai said. "Gaming is another good example of it, and we are working on iterating and making the formats work better so that it applies to more contexts as well."