Why is Amazon advertising a big deal for my brand?
2019 was the first year that digital ad spending surpassed traditional paid media, and the momentum for digital advertising is picking up. Google and Facebook still hold 50% of digital ad spending due to their well-developed ad platforms with controls to allow brands to target customers at all stages of the funnel and capture customer data for retargeting along the way. But Amazon’s share of the digital media pie is growing to challenge Google’s and Facebook’s digital marketing “duopoly”; Amazon will have nearly 10% of all digital ad spend in 2020.
Up to this point, advertisers have generally thought of Amazon as a bottom of the funnel marketing channel primarily impacting transactions on Amazon. However, recent studies suggest that a brand’s Amazon presence also has a significant influence on transactions that occur off-Amazon. In fact, nine out of ten customers pass through Amazon for product research while only 5% of all retail sales are transacted through Amazon. THIS IS WHY AMAZON ADVERTISING IS A BIG DEAL!
Because nine out of ten customers are using Amazon for product research, savvy brands should be utilizing Amazon to target customers in all stages of the marketing funnel while CPCs are still lower than Google and Facebook!
The big shift is thinking about Amazon ads as being influential for off-Amazon purchases. When brands do this, they can start to include Amazon advertising in their mid/upper funnel ad strategy.
We can see this trend playing out in the battleground industry of consumer packaged goods (CPG). CPC (Cost Per Click) are among the highest in the CPG category because of the rapidly increasing number of private label brands. In 2019 CPG brands have shifted 50-60% of their spending to Amazon away from Google where they are making their ad budget go further. Analysts expect this trend to continue in future years, contributing to Amazon eating away at the Google/Facebook duopoly.
How do brands manage ads on Amazon?
Amazon currently has 4 ad types: Sponsored Products, Sponsored Brands, Sponsored Display, and Display. Sponsored Products and Sponsored Brands are “search” ad types which make up 70% of Amazon advertising revenue. Sponsored Display and Display are “display” ad types which make up the remaining 30%. These are all PPC ads, but all are managed slightly differently.
Sponsored Products ads: Most robust ad management, placement, and measurable returns.
60% of all Amazon advertising revenue comes through Sponsored Products. It’s the most important ad type by far. These are the product ads you are most familiar with—they say “Sponsored” and typically appear at the top of product search results. You may be surprised to learn that Amazon also places these ads at the bottom of search results and within listing pages to be able to target customers at different phases of their purchase journey. Different placements have very different results for each brand and if you’re not managing closely, it could be the difference between an effective and ineffective campaign.
The catch with this ad type is that you must possess stock of the product you are advertising and be the seller in the buy box in order to participate. So brands who want to manage a Sponsored Products ad budget must rely on their sellers if they are selling 3P, or manage themselves if they are selling DTC or 1P.
If you have one takeaway from this blog about Sponsored Ad management, let it be this: whether you are working with an agency, 3P sellers, or self-managing, make sure your ad manager is using a software or you will face massive amounts of wasted ad spend. This is due to the missing controls within Seller Central or Vendor Central to dynamically adjust bids and graduate keywords to more efficient bid types. Fortunately, there is software that do this proficiently! Pro tip: excellent ad managers will not only use software, but also perform manual manipulation on that software to optimize results. These excellent ad managers are hard to come by, but you’ll know you found one when they are willing to show you their ad results and talk at length about how the developed their process through years of trial and error.
Sponsored Display and Display ads: Most flexible and traditional ad type used to target customers at every stage in the funnel.
Display ad types are the fastest growing segment of Amazon advertising and represent 30% of all Amazon advertising revenue today. These ad placements appear on all Amazon owned sites, so there is a broader reach, and all of the traditional formats (video, animated text, etc.) and placements (banner, footer, sidebar, etc.) can be utilized. The best part about these ads is the ability to strategically coordinate campaigns for each stage of the advertising funnel. And here’s the most undiscovered use for this ad type: you can send clicks wherever you want…even your DTC store!
Amazon recently released a self-service portal for these ad types so there is no longer a huge hurdle of monthly minimums preventing brands from testing the waters. Similar to Sponsored Ad management, make sure your ad manager is using a software or you will face massive amounts of wasted spend.
Sponsored Brands: Least robust ad type; don’t use unless you send clicks to your Amazon Store.
While the ad placement for this ad type is killer (banner ad occupying 50% of the screen), the management functionality is poor, making this the least utilized at type. We recommend that brands don’t even consider using this ad type unless they are sending clicks to their Amazon Store (customers from brands we partner with who navigate through the store typically buy 50% more due to broader brand exposure).
The management functionality is poor for this ad type because the products featured in each banner ad do not change dynamically based on keyword performance. Since no software is able to automate the important parts of the ad management, there is a high risk for wasted ad spend on this ad type.
The hidden (and free) ad type that so many brands miss out on.
Listings! Every listing on Amazon is like a billboard for your product. Chances are, customers will see a product’s Amazon listing ten times more than they will see a product detail page on the brand’s website. Amazon buys placements on Google out of their own pocket. And since they have really deep pockets, and the listing is already getting excellent traffic by nature of being on Amazon, the ad typically appears in the top 3 spots in any Google search. Amazon also ranks organically well on Google. Brand’s can harness this free ad type by simply having a majority of their catalog built out and stocked on Amazon.
How much should brands budget for Amazon Advertising?
This is one of the most common questions we get, and for good reason! For most brands, spending ad dollars on Amazon is a new concept and they don’t have the data they need to create an informed budget.
We recommend setting a conservative ad budget for the ad types that align with advertising goals, and then reviewing the data after about 90 days to determine a more firm budget.
For Sponsored Products ads, 2.5% of retail sales is a conservative ad budget when brands use this ad type to only target bottom of the funnel customers to drive conversions. If brands are also using this ad type to target upper and mid-funnel customers to promote awareness, doubling this number would be appropriate.
For Display ads, we recommend allocating 3% of your typical display ad budget to Amazon as a conservative starting point.
These starting budgets should provide enough data to have a comprehensive 90 day review to determine how you should adjust these budgets and campaign management. Savvy brands can also compare their Google/Facebook ad performance for each funnel stage (upper, middle, lower) against your Amazon ad performance at the 90 day mark.
Lastly, make sure your Amazon ads are managed by a professional. Since the platform is less developed than Google and Facebook, it is much easier to waste spend without the proper software and experience.
Other posts for further learning on this topic:
Amazon as an Integral Part of your Sales Strategy
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