Preparing for the Next Big Algorithm Change: What Every Ecommerce Brand Should Know

Algorithm changes and platform updates have become a constant in the ecommerce industry. Major platforms like Amazon, Meta, and others frequently alter their algorithms, fee structures, and policies, impacting ecommerce businesses worldwide. For direct-to-consumer (DTC) brands and online retailers, staying ahead of these changes is crucial for maintaining visibility, profitability, and growth. This article, based on Episode 61 of The Operators Podcast with Sean Frank, Jason Panzer, Matt Bertulli, and Mike Beckham, explores strategies for ecommerce brands to prepare for these changes and teaches them to adapt effectively.

Understanding the Impact of Algorithm Changes

Ecommerce platforms like Amazon, Meta, Walmart, and Target have complex algorithms that determine product rankings, ad performance, and overall visibility. These algorithms are the lifeblood of many ecommerce brands, but they can be unpredictable. For instance, Amazon’s frequent updates to its ranking algorithms and fee structures can dramatically affect a business's bottom line if it heavily depends on Amazon for ecommerce sales. Similarly, Meta’s advertising algorithm changes and tracking updates, like those experienced in the wake of iOS 14, have challenged brands to rethink their digital marketing strategies.

The key takeaway? Algorithm changes are inevitable. Brands that understand and anticipate these shifts will be better positioned to maintain their ecommerce business resilience and thrive in a competitive market.

1. Diversify Revenue Streams Across Multiple Platforms

One of the most effective ways to build resilience is to diversify your ecommerce strategy across multiple platforms. Relying solely on one platform, such as Amazon, can put your business at risk when unexpected algorithm changes or fee increases occur. For example, brands solely dependent on Meta ecommerce for revenue and traffic have faced significant disruptions when Meta shops experienced tracking and ad delivery issues earlier this year​.

To mitigate these risks, consider expanding your presence on other ecommerce platforms like Walmart, Target, and smaller marketplaces that cater to your niche. Developing a robust direct-to-consumer (DTC) channel through your own ecommerce website is also essential. This approach reduces reliance on third-party algorithms and allows you to create a more personalized shopping experience, building long-term customer loyalty.

2. Invest in Creative Marketing Strategies

Creative marketing is now more critical than ever. Platforms like Meta and Amazon are increasingly focusing on the quality and diversity of content. Meta’s algorithm, for instance, now heavily favors video content and interactive ads. Brands that invest in creative, varied, and engaging marketing materials stand a better chance of maintaining visibility and engagement, even as algorithms evolve.

Additionally, it’s important to understand that “creative is the new targeting.” Meta has reduced the ability to granularly target specific audiences due to privacy regulations, so having diverse creative assets helps brands reach broader audiences organically​.  Whether you’re developing high-quality videos, user-generated content, or interactive product demos, the goal should be to create engaging materials that appeal to various customer segments.

3. Monitor Financial Health and Prepare for Different Scenarios

Algorithm updates and platform changes can lead to fluctuations in revenue. For example, understocking or overstocking inventory due to sudden algorithm updates can significantly impact cash flow. To build resilience, ecommerce brands need to develop a robust financial model that accounts for different scenarios, including revenue drops due to algorithm changes or fee increases.

One approach is to create a financial forecast with three models: base, upside, and downside. This allows brands to anticipate various outcomes and prepare accordingly. Monitoring financial health also involves staying on top of metrics like conversion rates, customer acquisition costs, and return on ad spend (ROAS). Brands that adapt quickly to fluctuations in these metrics will have a better chance of remaining profitable when platforms change their policies or algorithms​.

4. Optimize SEO and Stay Informed About Best Practices

SEO remains a critical component of ecommerce success. Algorithm changes on Amazon, Google, and other platforms can affect product visibility and ranking. Keeping up with ecommerce SEO tips and best practices ensures that your business remains competitive. For instance, Amazon algorithm updates can change the criteria for product rankings, making it essential for brands to continually optimize their listings with relevant keywords, high-quality images, and customer reviews.

Investing in SEO best practices for your ecommerce website, including optimizing product pages, improving site speed, and using schema markup, can also enhance visibility across platforms and search engines. Brands should stay updated on the latest trends in ecommerce SEO to avoid losing traction when platforms adjust their algorithms.

5. Stay Agile and Adapt Marketing Strategies

Agility is key to surviving algorithm changes. Brands that can quickly pivot their ecommerce marketing strategy based on platform performance will have a significant advantage. For example, if Meta’s ad performance declines due to an algorithm update, brands that have diversified their marketing spend across other platforms like Google Ads or TikTok can minimize losses.

Another strategy is to maintain a balanced marketing mix that combines paid and organic methods. Investing in email marketing, influencer partnerships, and content marketing can reduce reliance on paid social media ads and create a more sustainable ecommerce business model. Brands that build strong email lists or engage with influencers can drive traffic and sales without being overly dependent on platform algorithms​.

6. Use Technology to Monitor and Respond to Algorithm Changes

Leveraging technology such as ecommerce analytics tools and predictive analytics platforms can help brands monitor their performance across different platforms. Tools like Northbeam provide insights into ad performance and customer behavior, allowing brands to identify trends and pivot strategies when needed​.

Predictive analytics tools can also assist brands in forecasting how algorithm changes might impact their sales, enabling them to prepare for inventory fluctuations (avoiding both understocking and overstocking) and adjust their marketing efforts accordingly. Brands that integrate these technologies into their operations gain a competitive edge by responding proactively to platform updates rather than reacting after the fact.

7. Engage Directly with Platforms and Build Strong Partnerships

Establishing strong partnerships with ecommerce platforms like Amazon, Meta, and Walmart can give your brand access to valuable resources and insights. Attending platform summits, such as Meta’s recent event discussed in the podcast​, allows brands to network directly with platform representatives and understand upcoming changes.

Building these relationships is particularly crucial when platforms experience technical difficulties or implement significant updates. Brands that maintain open communication channels with platform reps can receive timely assistance and updates, helping them adjust their strategies promptly.

8. Educate and Train Your Team

Staying prepared for algorithm changes also means ensuring your team is well-informed and adaptable. Ecommerce businesses should invest in ongoing training and development for their marketing, operations, and sales teams. Understanding the nuances of each platform and how they affect your ecommerce strategy enables your team to react swiftly when changes occur.

This training should include an emphasis on analyzing ecommerce business data, understanding financial implications, and developing creative marketing approaches that work across multiple platforms. A knowledgeable team will be able to make informed decisions that minimize disruptions to your business during times of platform instability.

Conclusion: Building Resilience for the Future of Ecommerce

The ecommerce landscape is constantly evolving, and platform algorithm changes are a reality that every ecommerce brand must face. By diversifying revenue streams, investing in creative marketing, monitoring financial health, and leveraging technology, brands can build a resilient business capable of adapting to these changes. Staying proactive and well-informed ensures that your brand not only survives but thrives in the ever-changing ecommerce ecosystem. To find out more about the current ecommerce landscape, tune into The Operators Podcast on YouTube, Spotify, or Apple Podcasts.

Resources:

1. E061: Part 1: How to build resiliency into your business – The Operators Podcast