Amazon is gaining advertising market share after a long period where Google and Facebook have been dominant leaders. Although Amazon's digital ad revenue in Q1 2019 lagged behind record numbers reported in the previous quarter, ad sales continue to grow year-over-year, and the e-commerce giant has set its sights on the global digital ad market.
As Amazon continues to outgrow its roots as a “bookstore,” how does the platform stack up for advertisers and what can they expect as they allocate more ad dollars?
Blurring Lines Across Search, Social, and E-commerce
A recent eMarketer report showed that Amazon became the third largest digital ad platform, behind Google and Facebook, in 2018. And, after the company announced plans to acquire ad server Sizmek in May of this year, Bloomberg reported Amazon as the only real challenger to the control Google and Facebook have over the online advertising market.
As the duopoly morphs into a triopoly and competes fiercely for ad dollars, the worlds of search, social, and e-commerce will continue to blend together. Amazon is seen by many as a massive retail search engine, Google has seen great success with Shopping Ads, and now Facebook, through Instagram, is heading in the direction of becoming a major e-commerce player. Marketers will need to work hard to connect the dots across all these different channels and seek out an independent view of the entire customer journey, especially as lines are blurring and customers hop seamlessly between all three platforms.
The search-and-buy nature of Amazon proves appealing for advertisers’ ROI because of the close relationship between searching a product (or seeing its display ad) and having the ability to purchase it. Other major retailers, like Walmart or eBay, are taking the hint from Amazon and ramping up their own offerings to take a piece of the e-commerce advertising pie.
Taking a Page From Traditional Search
Some marketers, as many as one out of three, claim to be shifting a portion of their Facebook or Google search budget to Amazon — however, for Marin Software’s clients, it appears to be incremental budget at this point. Another main driver is shopper marketing, which focuses on the customer at the point of purchase. Last minute advertising at the moment of purchase has traditionally proven be very effective — this could include free samples, lighting, ambience, cart ads, checkout offers, and so on.
There is a huge spend here, only a small portion of which is digital (~15%), so we believe some of this budget will be making its way to Amazon ads. Moving the concept of shopper marketing to digital is an interesting development as well, and showing complementary products at checkout or what other people bought is a good example of this tactic on Amazon.
Either way, the growth is not surprising, especially for CPG brands that now have clear measurement of actual sales rather than trying to extrapolate to offline sales. Whether budget goes to a traditional search engine or an eCommerce channel like Amazon, the same best practices should be applied.
For example, in traditional search marketing, brands have grown accustomed to bidding on their own brand terms because if they don’t, a competitive brand will undoubtedly buy those terms and appear at the top of the search results. We call it “protecting your turf” and the same principle applies to Amazon. As customers move from search to purchase, brands on Amazon must be proactive in protecting their turf, or risk losing out on potential sales to savvy competitors.
Advancing Voice Search
According to a study conducted by National Public Radio, 53 million U.S. consumers own a smart speaker today. Amazon certainly made its voice heard with the introduction of Alexa and Echo — the company reportedly fields an average of 130 million questions a day via “Alexa.” Voice search is one area with the potential to impact marketing where the other giants need to catch up. Facebook recently stepped out of the ring after announcing that Portal has Alexa built in. On the other hand, recognizing Amazon’s dominance in the space, Google launched Google Shopping Actions last year as an attempt to monetize voice search on the transactions. If Google and Amazon focus on capturing value from the voice transaction, Alexa and Google Home could be surprisingly free of traditional “ads.” The value is in the query and brands will need to figure out how to rise to the top.
With Amazon’s expected growth in the space and its pool of captive customers, including its Prime roster with approximately 101 million U.S. subscribers, marketers should consider the value of tethering with the platform. If brands aren’t already advertising there, they risk the opportunity of being out of sight when consumers are ready to buy.
Wesley MacLaggan has been working with Marin Software since 2008. He is currently SVP of Marketing at Marin Software. Previously he led the product team where he was responsible for driving Marin’s roadmap and working closely with engineering to deliver innovative advertising solutions to the market. He has over a decade’s experience developing and delivering analytical enterprise SaaS applications, including four years with Applied Predictive Technologies working on their platform to help retailers maximize the return on their promotional spending. MacLaggan began his career providing strategic guidance to companies in a range of industries with Mercer Management Consulting. He holds an Economics degree from Dartmouth College.