When 2019 wraps, Amazon’s advertising business is projected to be more than 50% bigger than it was a year ago—when advertisers spent nearly $5 billion—as it continues to challenge its much bigger rivals, Google and Facebook.
Meanwhile, the agencies that work with brands on the platform say Amazon’s advertising ecosystem is itself becoming more competitive as advertisers work harder to generate the same returns they saw just two or three years ago.
Even when shoppers search for a brand’s products by name on Amazon, they may still see the brand’s competitors first, which is in part why Amazon is a must-play ad channel now, said Eric Heller, chief knowledge officer at digital marketing agency Wunderman Thompson. And it certainly doesn’t hurt that Amazon ads help juice organic rankings.
But, like Amazon as a whole, Amazon Advertising has a lot of moving parts. In the coming days, we’ll look at how Amazon Advertising is going to change in 2020. But, to start, let’s break down its existing components, as well as how they work together and how advertisers use them.
For starters, how brands advertise on Amazon depends whether they are endemic or non-endemic: Endemic brands are those that sell on Amazon; non-endemic brands do not.
According to Todd Bowman, senior director of Amazon and product marketplaces at performance marketing agency Merkle, when working with endemic brands, Merkle first looks at search tactics, which include sponsored product ads, sponsored brand ads and sponsored display ads.
“The reason we start with those is they are lower funnel and clients are looking to find ways to sell products,” he said. These ads help drive traffic to products and support what he called the “Amazon flywheel”—more traffic means more reviews, which “support that product to show up organically.”
Agency reps didn’t share cost estimates for these products, but said they’ve seen prices go up 200% across Amazon’s search units in the last two years while comparable units from Google and Bing have remained relatively flat.
Sponsored products are the product listings that appear on the first page of search results intermingled with the products that rank organically for a given query.
According to Andrew Ruegger, managing partner and head of commerce and data science at advertising company GroupM, as much as 60% to 70% of Amazon Advertising budgets are typically allocated to sponsored products because they link to specific products and boast high performance rates.
Elizabeth Marsten, senior director of strategic marketplace services at search engine marketing company Tinuiti, agreed that sponsored products are “by far the tried and true ad type you start with” because of said return, but also because they have the lowest barrier to entry—and they were Amazon’s first self-service ad product.
A report from Tinuiti noted targeting capabilities for sponsored products have recently expanded, allowing advertisers to reach customers as they browse product detail pages and filter search results for similar products.
Sponsored brands, formerly known as headline search ads, are the keyword-driven ads that appear atop search results. They include a brand logo, headline and up to three products.
Tinuiti noted Amazon expanded sponsored brand placements in 2018, adding them to the middle and the bottom of the search engine results page (SERP).
Bowman said Merkle has found sponsored brands help drive awareness among shoppers in the consideration phase of the customer journey.
However, Ruegger said it has been challenging for brands to understand what exactly they are selling through the sponsored brand unit—merely that it resulted in a certain number of sales—and they haven’t been as successful as other units from a performance standpoint.
That being said, sponsored brands can be tied to category pages or a brand’s store page, which have better conversion rates and yield larger basket sizes.
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