“If you build it, they will come” is the playbook that Amazon has been using in recent years to shore up its paid search and display advertising platforms. In 2017 Amazon created 2,000 new jobs in New York City, mostly in advertising, to fuel its ambitions. And it’s been on a tear in recent months, adding more features and reporting to its platforms and finally launching a self-service training console for advertisers.
In response to more investment in an advertising offering, many brands are moving beyond just experimenting with Amazon advertising, and towards shifting budget from incumbents Facebook and Google.
Two new studies released in recent weeks explain why Amazon’s advertising offering has become so compelling. Performance marketing agency Nanigans surveyed 100 retail marketing executives for its “Amazon’s Advertising Ascent“ report, each responsible for $50 million or more in annual online sales. Amazon already captures 14% of this group’s budgets (compared with 21% for Google and 19% to Facebook), but over half of these brands are planning to increase ad spend on Amazon. Forty-one percent are spending incremental ad budget on Amazon, and others are shifting ad budget from Facebook and Google to Amazon.
Brands are finding Amazon’s advertising platform to be a compelling destination for the marketing… [+]
1. Direct sales data means clearer ROI
The Nanigans study shone light on a major factor for the shift: Retail marketers find the metrics from Amazon more compelling. Amazon is generally the place shoppers go to actually buy stuff, as opposed to simply discovering or researching a product, the historic domain of Facebook and Google.
Retail marketers scored Amazon better than Facebook and Google across ROAS (Return On Ad Spend, or how efficiently ad dollars translated into sales), CPMs (Cost Per Mili, or the actual expense of a user clicking through to a product or landing page), Reporting, Campaign Management, and Attribution.
This underscores the main reason these brands are finding Amazon advertising compelling: a clear Return On Investment (ROI). With other platforms that aren’t directly connected to online checkouts, it can be difficult to know how much ad spend truly converted. Amazon has the shopper data, knows what actions the shopper took after seeing an ad (i.e. clicking on the ad or ultimately buying from a competitor), and whether the shopper actually converted.
2. Amazon is getting better at sharing data
A common complaint about Amazon is that it shares only a small fraction of the mountain of shopper data that it compiles. There are signs that Amazon is recognizing that data like keyword volume, impression share and advertising placement is information that advertisers need access to in order to build out more campaigns and justify additional spend.
Amazon recently launched Brand Analytics in Seller Central, reporting which shows the relative rank of a given keyword, similar keywords, and which products received the most traffic and ultimate sales conversions from each keyword. Previously, brands operating on Vendor Central would have had to take out a premium reporting package from Amazon to access this data. The fact that it’s now been shared for free with millions of users on Seller Central (typically smaller merchants than Amazon’s Vendor Central) highlights that Amazon is recognizing the power of its data to drive more marketing and advertising spend.
3. Access to Amazon’s power-shoppers
The retail marketers in Nanigans’ study widely credited access to Amazon’s large, affluent and active shopper base as major reasons to advertise there.
While the primary reason for advertising on Amazon was related to Performance and ROI (17% of respondents), the next most common reasons were “Size of the audience available on Amazon” (16%), “[Our] target audience is active on Amazon” (15%), and “Amazon’s users are in a purchasing mindset“ (14%).
Feedvisor, which surveyed over 500 brands for its “Brands & Amazon“ report, also found that a large percentage of respondents viewed Amazon as a driver of net new business. Brands are finding that a portion of shoppers are so loyal to Amazon that they won’t really consider buying something off the platform. These shoppers are generally going to be net new business for advertisers, an audience that couldn’t be reached through other advertising platforms.
Brands Reasons For Advertising on Amazon
Wariness still prevails amongst advertisers
But even the most robust reporting, analytics and wallet share can’t fully quiet the concerns that many brands have with Amazon as a company.
Some advertisers are spending money to advertise their products in search results, only for Amazon to show a pop-up promotion for their own private label product.
An advertiser demonstrates how a Sponsored Product ad on Amazon links to a page where Amazon then… [+]
Out of Feedvisor’s cohort of 500 brands, 44% have over half their sales coming from Amazon, a concentration of sales that triggers concerns around Amazon being both an advertising channel and a competitor.
Almost as many respondents cited their leading concern as being competition with Amazon’s Private Label products, compared with respondents citing competition with other brands being their primary concern. As Feedvisor’s report concluded:
Of the brands selling on Amazon, a large portion of brands (70%) cited general competition with other brands as one of their main concerns. More than three in five (66%) conceded that competing with Amazon’s private label items, which range from apparel and office supplies to grocery and electronics, is one of the biggest pain points about selling on Amazon. Brands in the categories of Toys & Games, Beauty, Health & Personal Care, and Electronics felt this threat most acutely.