B2B Advertising Solutions in the Modern Age: The Case for Marketplaces

Henry Ford of Ford Motor Company once said that “stopping advertising to save money is like stopping your watch to save time.” Put differently, advertising is not just an essential part of building a business; it is the lifeblood of a business. Although advertising strategies have changed over the years, its predominance in our society and economy has only grown. Total ad spend in the United States alone was ~$395 billion in 2023 and is estimated to have grown to over $425 billion in 2024. Most ad spend is on direct to consumer (“D2C”) campaigns, with business to business (“B2B”) advertising only accounting for $30 billion of the total spend in the U.S. in 2023. 

Compared to D2C, B2B advertising is more difficult to execute and track the return on ad spend (“ROAS”). Most B2B ad strategies focus on smaller, specialized audiences that are harder to target on common D2C advertising channels such as social media platforms or search engines. In addition, B2B advertising is still stuck in the past, with two thirds of ad spend going towards offline channels such as in-person trade shows, print trade publications, and cold outreach. These channels lack the scale and versatility of digital media platforms that dominate D2C advertising; however, they’re still heavily used to ensure an ad gets direct exposure to specialized B2B audiences. 

In today’s world, where advertising is vital to building a successful business, there is clearly room for improving B2B channels. B2B marketplaces aggregating demand on industry-specific platforms represent a compelling new medium for effective advertising. Marketplaces offer a unique opportunity for brands to advertise directly to key business decision makers as they actively transact. For example, Provi, an Interplay portfolio company, is a wholesale marketplace for alcohol distribution that connects brands, distributors, and buyers (bars, restaurants, retailers) all on one platform. By embedding advertising on the marketplace, Provi gives brands the ability to advertise directly to large business buyers as they transact. This is a massive unlock for companies that have struggled to see a return on their B2B advertising efforts. 

In addition to creating focused environments where advertisers can directly connect with key decision makers, B2B marketplaces offer brands data-driven insights from first-party sources. Tracking exact ROAS for traditional B2B advertising channels like conferences or trade publications is almost impossible. Even if businesses are utilizing more modern digital advertising channels, tracking results can still be complicated by third-party privacy protections. With the right tools and ad infrastructure, B2B marketplaces can offer detailed tracking and performance analytics on all advertising campaigns, allowing brands to receive detailed information on click through rates, cost per click, ROAS, and more. Marketplaces can also provide brands detailed customer insights from their first-party data to help create effective, targeted campaigns. A data-driven approach creates cost efficiencies as businesses can pay for specific placements or results, such as clicks or conversions. 

B2B marketplaces are only a valuable channel for advertising if there is significant traffic and usage from key industry players - but this traction is growing as macro tailwinds such as a shift toward e-commerce and a preference for the marketplace model gain momentum. Compared to the consumer sector, the B2B sector has been slower to adopt e-commerce. As marketplace investor Fabrice Grinda has noted, digital penetration is still below 5% in many industries. However, this is changing as technology becomes more accessible and younger generations start to take over leadership positions (71% of B2B buyers were Millennials and Gen Zers in 2023). B2B e-commerce adoption is accelerating, with global sales hitting $23.4 trillion in 2023 (16% YoY growth rate) and sales in North America and Europe reaching $4.8 trillion in 2023. Marketplaces tap into this trend by meeting buyers where they are already shopping and simplifying the sales funnel by aggregating products or services in one place. 

Not only is e-commerce adoption growing, the use of third-party marketplaces is increasing as well. Within B2B e-commerce, marketplace transactions are expanding at a rate 7x faster than traditional e-commerce. According to a recent study done by BCG, B2B buyers prefer marketplaces as opposed to traditional e-commerce sites because they provide “easier access to a wider range of quality products and better availability and visibility of inventory as well as good customer service, flexible delivery, and individual pricing.” With more businesses transacting online and via marketplaces, more brands will want to take advantage of this trend by advertising on these platforms. 

Although we’re still in the early innings of B2B commerce moving online and to marketplaces, there are already many examples of successful advertising campaigns via marketplaces. Instacart, which operates both as a D2C and B2B marketplace, has been very successful with their advertising initiatives, monetizing 3.0% of GTV through advertising (transaction revenue represents 7.3% of GTV). As of Q3, Instacart’s ad revenue was up 11% YoY, reflecting growing spend from brands. Alibaba and Amazon Business, two of the largest B2B marketplaces in the world, have similarly generated significant returns through advertising initiatives. As the adoption of B2B advertising on marketplaces continues, more specialized platforms like Provi should increasingly benefit as their industry specific audience and first-party data entices brands trying to launch targeted campaigns. 

As marketplace investors, we’re excited by the opportunity that embedded advertising on B2B marketplaces presents. Typically, marketplaces make money by charging a take rate on transactions. However, there are constraints on how high the take rate can be due to customers’ willingness to pay. Therefore, a successful marketplace must have a viable roadmap for expanding their take rate through other channels. In addition to common channels such as SaaS fees and financing tools, advertising can be an effective way for marketplaces to monetize their platform. Compared to other channels, advertising is an attractive strategy because it doesn’t take money away from buyers/sellers on the platform and it’s high margin revenue for the marketplace. 

For many reasons, B2B advertising will always be more complex and difficult to execute than D2C advertising. There’s often multiple decision makers in the mix, longer sales cycles for higher ticket prices, and an interpersonal component that is unlikely to go away. However, compared to existing B2B advertising channels, B2B marketplaces present a compelling opportunity for brands to advertise directly to key decision makers in a dynamic and data-driven format. We are excited to invest in businesses taking advantage of this opportunity.