Insights

What Brands Should Know About Amazon’s Ad Business

Expo_West

When it comes to Amazon and their growth, conversations tend to revolve around retail sales, the growing number of Prime members, and AWS. One sleeping (or not-so-sleeping) giant for Amazon is their rapidly growing advertising platform, which in itself became a multibillion-dollar business in Q1 of this year after growing 132% Y/Y.

Why Amazon ads?

Brands and sellers alike have turned to using Amazon ads to promote their products for a handful of reasons. Perhaps most importantly, the return on investment is significant: Amazon claims that U.S. advertisers using AMS saw more than 7x return on ad spend in 2016, which is significantly higher than ROAS of TV, mobile, and display ads in the same year. While these figures may initially raise some suspicion, Amazon’s substantially higher returns make sense: unlike traditional mediums, customers on Amazon are actively looking to shop, and can be shown ads for products they’re specifically searching for.

Meeting customers where they already are

Amazon has become a top destination for both online spending and product discovery. Not only does the marketplace account for nearly 50% of all e-commerce spending, it’s the number one location for customers’ first product search. Even if customers aren’t going to purchase something on Amazon, roughly 80% of them regularly use the marketplace to discover new products and brands, and well over half of them are checking their smartphones to research products while shopping in-store. Marketing directly to these consumers makes perfect sense — brands can appeal to the right customer on their preferred platform at the ideal time. Better yet, the first three items displayed in search results account for 64% of clicks, including sponsored products.

Moving into the future

Amazon’s ad business is big, and for good reason — and growth isn’t expected to slow down any time soon. Analysts from eMarketer predict that Amazon will continue to climb the ranks, ending up as the third largest online U.S. seller of advertisements by 2020, only behind Google and Facebook. According to MarketWatch, analyst Michael Olson claims that “by 2020, we expect Amazon ad revenue of $16 billion and by 2021, beyond the scope of our current model, we believe it is highly likely that profits contributed from advertising will exceed those from [AWS].”

New technologies

Recently, Amazon publicly announced their latest beta ad offering: mobile video ads, placed right in search feeds. Currently, ads can only be displayed on iOS devices (iPhones and iPads), must contain audio, and cap off at 90 seconds.

Netrush has been experimenting with video search ads, promoting a selection of our partner brands through the new program. “So far, it’s been promising,” says Pinky Gonzales, Director of Marketing Services at Netrush. “We like the direction Amazon is going with video. Our brand partners are constantly looking for opportunities further up the funnel with a higher potential to convert.” As with any creative marketing initiative, content and messaging are key. “With video, storytelling becomes part of the message,” Pinky says. “It’s about the ‘how’ as much as it is about the ‘what.’ Brands have an opportunity to truly showcase their personalities. A video is not just a coupon that says ‘we have this for sale.’”

Leveraging advertising on Amazon is increasingly important, and should be seen as part of a brand’s greater marketing and sales strategy as the retail landscape continues to evolve. For more on the importance of authentic content marketing, read Substance, Storytelling, and E-commerce Authenticity.