2018 was a banner year for Amazon’s fast-growing advertising revenue. eMarketer estimates that US companies purchased $4.61 billion in Amazon ads last year, making it the third most profitable digital advertising platform behind Facebook and Google.
More and more brands are planning to advertise with the e-commerce behemoth to increase sales and brand awareness.Chris Apostle, executive vice president and head of performance for North America at Havas Media, told CNBC that his clients have increased their Amazon budgets by an average of 300 percent since 2017, and most plan to invest even more in the coming years.
Amazon gives its advertisers the ability to target potential customers based on their search and transaction histories, not just demographics. Brands planning to increase their Amazon ad spend must consider, however, that strategies that work for Google and Facebook ads may not be as effective with Amazon’s platform. To prosper using Amazon advertising, it’s critical for retailers to learn about tools and strategies that will not only attract customers but also maximize their return on investment.
Amazon advertisers can create compelling brand experiences with free digital storefronts. The e-commerce giant also offers advertisers several different types of ad products to achieve marketers’ goals. And sophisticated tools like retail optimization platforms (ROPs) are entering the market to help merchants harness the power of AI and machine learning to bolster the success of their ad campaigns and reach more potential customers.
In September 2018, as part of its rebranding efforts, Amazon began making Amazon Stores—free digital storefronts—available to all of its advertisers. The company also began offering new storefront templates that allow retailers to customize their stores to create more compelling branded experiences.
The Product Grid, for example, which is the most straightforward template, allows retailers to display all of their items on landing pages and to set up product categories. The Marquee template offers a wider variety of layouts, with the option of including videos or images alongside product reviews. Companies that want to increase traffic to their company sites can benefit from Amazon’s Showcase template, which allows brands to curate small selections of items to display on their digital storefronts, with the option of linking customers to their websites to view full product lines. With its free digital storefronts, Amazon has lowered the barrier to entry for smaller merchants. For larger retailers, storefronts have created opportunities to connect with new customers, while still focusing on driving traffic to—and establishing brand loyalty through—their main e-commerce channels.
Options for Gaining Visibility
Retailers can purchase several different types of ads depending on their marketing goals. Amazon offers three types of search-based ads: Headline Search ads appear in the top banner or skyscraper positions when people search specific keywords. Sponsored Product ads (featuring individual products) and Sponsored Brand ads (featuring up to three products and a logo) target customers ready to buy. The latter two are both included at the top of customers’ search results.
Advertisers can also purchase display ads, which appear on Amazon’s website, apps, and devices, as well as third-party sites. Display ads target customers based on their previous transactions and search histories.
Search-based ads are pay-per-click, so retailers don’t pay for wasted impressions and can easily track an ad’s success metrics. Display ads, on the other hand, are pay-per-impression and require more complex strategies, taking into account not just popular keywords but also creative design, audience segments, and customer reach. Search ads are perhaps the most effective way for retailers to maximize their Amazon advertising spend, but automation tools are essential to manage search advertising at the highest level.
Leveraging Data Analytics
To help advertisers maximize their ROI, both Amazon and third-party companies are building data analytics tools atop the Amazon Advertising platform to help merchants take the guesswork out of choosing which keywords will be most effective. Algorithms are also being developed to help retailers determine when and how to spend their advertising budgets to increase conversion rates. In a survey by Third Door Media, 44 percent of respondents said they plan to start using automation tools to manage their Amazon ad campaigns.
Amazon advertisers can also optimize their strategies by taking advantage of what are now known as retail optimization platforms (ROP). These platforms harness the power of machine learning and AI to help sellers automatically optimize keywords and campaigns to boost conversion rates. Amazon-specific ROPs take into account business, sales, and advertising data as well as external market trends to address fundamental challenges, such as determining the profitability of each product, discovering how pricing strategies and inventory management affect sales performance, and measuring advertising performance.
Online advertising is getting increasingly sophisticated, offering consumers more personalized shopping experiences while helping retailers zero in on their target audiences. Amazon is a leader in this effort: Pivotal Research predicts that the company’s fast-growing advertising sector will reach $38 billion in revenue by 2023. As competition heats up, retailers cannot afford to leave their advertising strategies to chance. Companies that take full advantage of Amazon’s growing platform and its automation and data analytics tools to drive their advertising campaigns will undoubtedly come out on top.
Teikametrics provides technology for optimizing advertising campaigns on Amazon.