We all knew Amazon was an online giant, but in 2017 the e-commerce behemoth sent shockwaves through the retail industry with its $13.7B acquisition of Whole Foods. It has been speculated that other traditional retailers like Nordstrom, Lowe's, and Ulta may be next.
Big dollar acquisitions of well-known brands generate lots of headlines, but as Amazon shakes things up in the bricks-and-mortar world, it's also taking steps toward disrupting the digital advertising industry, which is projected to grow to $355B by 2020.
What are the steps Amazon is taking?
They are aggressively hiring.
Amazon's Advertising division has a new HQ in Manhattan as of late 2017. It leased 360,000 square feet and hired 2,000 people for its advertising, Amazon Fashion, and AWS teams.
Releasing new product features on its advertising platforms.
In January 2018 they released a long-awaited feature to generate date-range reports on its AMS platform. While Amazon's self-serve ad technology is still far behind the feature set of the incumbents, it is continually releasing features to catch up and gain share.
What trends are they taking advantage of?
Amazon already captures 43% of e-commerce sales in the US and accounts for almost 50% of all online product searches. Amazon is capitalizing on its existing strength as a search engine & fulfillment provider by selling advertising space to brands who want to catch consumers at the transactional end of the purchase lifecycle.
Who does this matter to, and why?
Leaders, Marketers, and advertising professionals of consumer products brands who currently use digital advertising to reach their target customers.
Because now there is another contender in the race. There is now another vehicle to reach their customer and to do this profitably and directly at the time the consumer is actually making a purchase decision - not just discovering or researching.
Very large brands with significant media budgets will find there is another option for display advertising - their media buys can include Amazon's web properties and devices like the Kindle. Even the Alexa voice assistant could support advertising one day.
For those it matters to, what can/should they do?
Leaders, Marketers, and advertising professionals of consumer products brands should be initiating their Amazon PPC strategies now. The more experience and time these campaigns have, the better they perform and the more data there is to interrogate.
Advertisers should be using Amazon for end-of-funnel paid search campaigns, but not at the expense of abandoning their Facebook and Google ad campaigns. Those platforms are still powerful at awareness marketing and earlier in the consumer purchase lifecycle.
Will Amazon's display advertising fit that gap eventually?
Potentially, but currently it is built for very large brands with a reported $100K minimum spend. Amazon is disrupting the digital advertising landscape.
Here's what you need to know.
Brands want to shift ad spend to Amazon for a variety of reasons. One equity analyst predicts Amazon will quadruple their advertising revenue by 2020. This would take Amazon's estimated share of the digital advertising industry spend from around 3.5 percent in 2016 to over 10 percent by 2020 based on eMarketer estimates.
Over 50% of all product searches start on Amazon, and many consumers choose Amazon as their first website to scan for any purchase.
Amazon offers advertisers cheap, and efficient ad spend. In many instances, consumer product brands find their Return On Advertising Spend (ROAS) to be lower than on other paid search channels like Google and Facebook. Kiri Masters founder and CEO of Bobsled Marketing, says that "several of our clients have shifted significant advertising budget to Amazon due to the strong double-digit conversion rates their products experience on Amazon when compared to the lower single digit rates they get from Adwords, Google Shopping."
Amazon is at the transactional end of the consumer purchase funnel. Once a customer knows what they want to buy, Amazon helps consumers to validate their decision through product detail content and user reviews.
Amazon further removes friction from the purchasing stage through their inbuilt fulfillment offer: free and fast shipping and easy returns. By saving people effort and time and essentially guaranteeing a good experience, Amazon's creates a fast path to purchase for brands.
Kiri Masters says "With relatively little ad spend, brands can get fast sales. "