- On July 26, 2019
How much of your brand spending goes on Amazon Advertising? Are you measuring the return on investment (ROI) of your different media investments? Recent surveys on digital advertising in the US and in Europe show Amazon Advertising’s share of digital media spend increasing in comparison to the (still) dominant Google and Facebook. Many brands are now taking advantage of what Amazon Advertising has to offer and are using its advertising products not only on Amazon sites but also on third-party websites.
Google-Facebook duopoly persists but Amazon gaining market share
Together, Google and Facebook represent 60% of digital media budget in the US, but their share of digital media spend is beginning to decline. Amazon, however, is seeing its share increase. It should reach 8.8% in 2019 and 10% in 2020. What is also significant about Amazon Advertising is that analysts are predicting that by 2021, its income will reach $16 billion while that of Amazon Web Services (AWS), Amazon’s cloud services division which is currently the most profitable part of the group, is expected to reach $15 billion. According to Michael Olson, Senior Research Analyst at the Investment Bank Piper Jaffray, “By 2021, we believe it is likely that advertising operating income will exceed AWS”.
Amazon challenging Google and Facebook within FMCG and retail sector
In terms of total advertising budgets, Amazon is still a very small player. However, if we take a look at fast moving consumer goods (FMCG) and retail brands, the picture is very different. The performance marketing agency Nanigans surveyed 100 retail marketing executives for its Amazon's Advertising Ascent report, each of whom are responsible for $50 million or more in annual online sales. Amazon already captures 14% of this group’s budgets (compared to 21% for Google and 19% for Facebook).
Why is Amazon so appealing to consumer brands?
There are three main reasons why Amazon is attracting a greater share of brands’ digital media spend:
- Direct Sales provide clear ROI (which Google and Facebook can't offer)
As Amazon is both a marketplace and a media company, it is able to provide very precise ROI data from Amazon sales, whether in retail or marketplace, something Google and Facebook are unable to do. Brands can therefore have a clear view of how each and every $ they invest is generating X$ in sales. On search advertising, the return on ad spend (ROAS) can range anywhere between $5 for every $1 spent to $15 for every $1 spent. On display advertising, the return is lower due to its larger reach and can range between $0.5 for every $1 spent to $5 for every $1 spent.
- Amazon has a wealth of consumer data to share with brands
Amazon is also the world’s largest eRetailer and has insights on most of the world’s online consumers. These factors mean that Amazon is able to share very detailed customer profile data with you and help you define your key customer. For instance, let’s say your brand has a beauty product and you have a general idea that your main customer is a woman aged between 30 and 60 years old. Amazon Advertising can use the different consumer insights it has to enable you to refine your main customer’s profile to a mum using natural skincare products.
- Brands are able to enlarge their customer base thanks to Amazon's ability to target customer profiles precisely
Finally, thanks to its retargeting options, you can focus on customers who have looked at your product but not made a purchase, customers who have looked at your competitors’ products and not made a purchase, or customers who have purchased any product you consider to be of relevance. This offers you a very efficient way of broadening your customer base.
Google and Facebook have occupied the media space for longer than Amazon, but neither come from retail. Many brands believe Amazon Advertising is solely for the Amazon retail platform, but it’s not. You can run successful media campaigns on other websites using Amazon Advertising and you can even send the traffic generated from these ads to your own website. That’s not to say that Amazon Advertising is the only solution or that it should be used in isolation, but due to its powerful retail DNA, it’s a media you cannot afford to ignore.
This article was written by Jérôme de Guigné, eBusiness Institute Collaborator & Amazon Expert.
Advertising on Amazon is a form of Retail Digital Media. If you want to know more about how to gain a competitive edge with RDM, at the eBusiness Institute we have been advising brands on Retail Digital Media since 2014. With our help, clients learn how to utilise RDM successfully to win in the eCommerce space.
In addition to our work on Retail Digital Media, we have extensive experience of working with numerous brands on their digital transformation. We understand the importance of an optimised consumer experience to drive your brand’s sales online and offline. Contact us to learn more about how we can help you.