Amazon advertising is shaping the future of modern marketplaces. When compared to Google and Facebook, Amazon is quickly gaining ground in terms of e-commerce strategies and paid search investments.
Ad Spend and Digital Advertising
According to Emarketer, digital spending will see double-digit growth each year, soaring to $129.23 billion in 2021. Mobiles and websites will be the main drivers of this growth. Paid advertising remains to be an effective digital marketing tactic which is why senior marketing executives and search marketing specialists follow the markets of tech giants Google, Amazon, and Facebook.
Facebook and Google Ad Spend
Facebook and Google’s ability to adapt to and monetize the small screen is the key for their growth and dominance. Consumers transitioned from desktops and laptops to smartphones, tablets, and e-readers so both Facebook and Google developed a way to monetize these devices successfully.
Google’s most lucrative advertising product is AdWords. This resulted in an increase in clicks with paid clicks increasing 52% year on year, the highest escalation in seven years. Facebook, on the other hand, soared in revenue when they introduced ads into the newsfeed. Both company’s mobile apps make them effective ad platforms because they are viewed widely.
Google and Facebook were truly dominating ad spend in the U.K. and the U.S. However, there are signs of decline as Amazon continues to soar.
Google Shopping Ads vs Amazon Sponsored Products
Although Google Shopping ads and Amazon Sponsored Products both show a product’s image, title, price and rating, there are significant differences between the two e-commerce platforms.
- Google Shopping ads are not controlled by keywords. If you run a product search, Google decides what to display based on product information that an advertiser provides through a product data feed. They are available to advertisers who have their own e-commerce website and they show up across Google search, Google images, YouTube, and Gmail. They bring consumers directly to an advertiser’s website.
- Amazon Sponsored Products are keyword-targeted or product-attribute targeted ads. They function with an auction-based pricing model, bringing consumers to the product detail page of a specific product. They are available to Amazon’s first-party vendors and third-party sellers.
For Amazon, all ads are internal.
If you search for a specific item, search results will only be internal products that are sold on the platform.
Amazon does not send traffic away from its website when ads are clicked through or bought. This generates revenue for both themselves and the product seller. Rest assured that the tech giant will not capture information given by the audience, unlike Google.
Amazon does not retarget behavioral details of audience action which can cause some data privacy concerns.
In general, Amazon ads rank advertisements based on their total profit. Google ranks theirs based on the click-through-rate of the advertisement.
Amazon Ad Spend
Amazon has joined the race to the top. J.P. Morgan reveals that Amazon received $2.8 million in ad revenue in 2017 which then rose to $6.6 billion in 2019. This surge is made possible because Amazon ads have uniquely formatted options across their platform.
- Paid Sponsored Products can be pushed to the top of Amazon’s product results pages to reach a larger audience. How? By bidding on preferred industry keywords. This way businesses can have a product featured at the top, at the bottom, or on a similar product result page related to the search query.
- Amazon Display is Amazon’s PPC (pay-per-click) option that shows up on review pages, at the sidebar of product search results pages, and Amazon marketing emails.
- Headliner Ads are banner ads that advertise one or three products at a time.
In addition to those three, new advertising features were launched. Amazon advertising now offers sponsored display added as a self-serve advertising campaign type, sponsored brand video, and the ability to schedule key reports.
Amazon Advertising: An Effective and Efficient Platform
The retail giant has been around since 1994. As the company’s logistical processes improved, they started putting more attention to their advertising strategy. Soon businesses started investing in ad spend bringing about Amazon’s rise.
Since digital ad spend surpassed television ad spend, Amazon was definitely in the game. Amazon’s strategy involves giving more prominence to sponsored products in search results. Brands buy ads to win their place at the top. Advertisers have no choice but to pay attention.
The e-commerce site is unmatched as an ad platform because they sell millions of products that come with opulent data on buyer preferences. Amazon ads offer real-time insights on how any marketing campaign is performing.
Amazon’s streaming services also attract almost 180 million visitors every month. And with mobile shopping on the rise, Amazon’s mobile app has made it easy for consumers to research and purchase an endless list of brands and products.
Why More Brands Prefer Amazon’s Advertising Platform
In a survey conducted on more than a thousand retail business decision makers, Feedvisor’s second annual analysis reveals that 73% of brands advertise on Amazon. Among those brands, 83% experience returns up to four times with Amazon advertising, while a whopping 62% use Amazon to drive sales.
These percentages prove that there are reasons why brands prefer Amazon’s Ad Platform. Here are three of those.
- The company generates greater ROI than Google and Facebook. Feedvisor’s 2020 survey reveals that Amazon drives 59% of the brands’ highest return on media spend. This is why more brands are spending more on Amazon advertising.
- Amazon advertising spend (ROAS) brings about at least a 7x return on brands. The various solutions the ad platform offers, like self-serve pay-per-click ads and media buys, drew in a lot more brands who use several ad types. Among the most effective ad options are sponsored product ads, sponsored brands, sponsored display, and Amazon DSP.
- The tech giant makes advertising available in all the stages of a customer’s journey. As Amazon’s ad platform becomes more sophisticated, more brands target shoppers at all stages of their journey: awareness, consideration, purchase, and re-purchase.
Amazon has significantly influenced the modern e-commerce experience. Dani Nadel, president and COO of Feedvisor says that Amazon is where two-thirds of shoppers start product search and where three-quarters go when they want to make a purchase. So as Amazon continues investing in advertising solutions, brands should seize the opportunity.
The Time to Invest in Amazon Advertising is Now
Due to the Covid-19 pandemic, the Amazon Marketplace is experiencing a new normal specifically in relation to spend, average CPCs, and click-through rate. For many advertisers, the good news is average CPCs are decreasing. So, for brands who have the resources, it is best to bolster conversion rate and accumulate relatively cheap clicks.
The drop in CPCs is driven by the shift of sellers from the advertising auction. So, while this is the current reality in the Amazon marketplace, sellers can seize this opportunity and take the advice of the panel of experts from Tinuiti:
Jordan Gisch, Senior Strategist at Marketplace Search, says that “COVID-19 could have a lasting impact and can run throughout the fourth quarter of 2020. Holiday shopping will be severely affected.”
Advertisers who are in strong inventory positions during Q4 will be the ones that win by taking advantage of the lower cost to play that could last through 2020. This is also a great time to invest in upper funnel strategies since traffic and detail page views are currently on sale.
Amazon’s Unprecedented Hit
Senior Analyst at Marketplace Search, Courtney Macfarlane, reiterates that a lot of loyal customers of brick-and-mortar stores now turn to Amazon for product purchases. With the influx of new visitors to Amazon, advertisers can focus on awareness and consideration with the larger audience pools to target.
Categories like beauty are booming online. Shoppers who have been loyal to a certain brand may discover a different brand that they can also trust. Since top brands on Amazon are pulling back on ad spend, other brands can get market share
Eric Kauss, Director at Marketplaces Operations, reminds vendors and sellers to understand their inventory position and make plans for when business returns to normal.
The important thing to do is to drive traffic to the top ASINs where there is ample inventory so that they can restart the PO algorithm to generate future PO.
He recommends partnering with an agency that can help them better understand Amazon’s inventory forecast and how to use any excess to their advantage.
This way, product production orders can be placed in advance to be prepared for Prime Day and Q4 holiday sales.
The Future of Ad Spend
Since Ad spend has a lot to do with the digital marketplace, it is impossible to know for certain what the future of ad spend holds for businesses. At this time, more sellers and brands run ads on Amazon to gain exposure for their products.
This drives more customers to their listings. But given the surge of shoppers on Amazon, the ads may be doing more harm than good for brands whose inventory levels are not meeting the customer demand.
In setting an advertising budget, it is important to reallocate ad dollars based on demand and inventory. If stock is running low, consider turning off those ads and spend towards advertising products that have healthy inventory levels.
This is why it is important that brands re-evaluate their ad spend. Brands and marketing leaders need to be particular with investigating their ad options and invest in the platform that will work for their unique customer, advertisement and product offering.