Imagine the targeting abilities of Facebook combined with the ease of Google’s advertising management platform. This is essentially what Amazon is offering brands for their marketing strategies. It’s already the world’s largest retailer, raking in over $35 billion in net sales by April, 2017.
In 2016, Amazon earned $1.4 billion in ad revenue. Though it’s got a long way to go to reach Facebook’s ad spend of $27 billion, and an even greater disparity with Google’s $79 billion in earnings, this e-commerce hegemon has the ability to grow exponentially, and do so quickly. In fact, experts are predicting Amazon’s advertisement revenue to increase to $3.5 billion by the end of this year, and to grow over 60% in 2018.
How Amazon Advertising Works
Amazon Marketing Service’s (AMS) Sponsored Products offer advertisers the ability to launch a PPC campaign that’s similarly appealing to Google and Facebook in terms of cost-effectiveness and audience engagement. Also similar to Google AdWords, it’s based on a bid system. Once a brand wins a bid on a product, it will appear in the top search results when someone uses the appropriate keywords. The biggest decision left to the marketer is whether to select manual targeting (choice of the user) or automatic targeting (Amazon optimizes and selects a target audience for you).
When launching an AMS campaign, you have the option to select your ad goals: Boost product sales, increase book sales, drive traffic to an outside website, or increase app downloads. By starting out with similar advertising goals as Facebook, Amazon is clueing into an audience already familiar with launching a campaign on a major paid social platform. Unlike competitors such as Snapchat and Instagram that require effort to understand the functionality of the platform itself, and thereby present a learning curve to marketers, Amazon is tapping into a pre-existing understanding. The layout of the tiered, ad campaign structure, too, is similar to Facebook and Google AdWords.
The Secret is in the Targeting
The major way Amazon is likely to become a true competitor to Facebook and Google is with its audience targeting abilities. A quick statistical rundown of Amazon:
- 300 million total user accounts
- 50% of online US shoppers use the Amazon mobile app
- 80% of U.S. Amazon buyers make a purchase on Amazon at least once a month
- Amazon accounted for 53% of 2016 e-commerce growth
With the amount of users and their high engagement and return rates, Amazon represents fertile ground for advertisers. As an e-commerce giant, Amazon offers key insights into consumer behavior like no other competitor can. For brands that are in a products industry (versus services), the ability to have the audience of the world’s largest online retailer at their disposal is a huge advantage. Amazon can track the products people search for, put in their cart, complete the purchase on, etc. These insights become invaluable to any online retailer.
Amazon is King of Keywords
More people use Amazon for product searches than Google, with 55% starting their search on Amazon versus the 28% who choose a search engine instead. Also, as is the nature of e-commerce, many people are searching for specific keywords or terms, which makes targeting and reaching them easier. Instead of wasting money on vague keywords in hopes of appearing in Google search results, Amazon encourages more focused campaigns.
Additionally, conversion rates are likely to be higher on Amazon due to these keywords. Often, users will type in a more specific item they are looking for (e.g. sandals, instead of just shoes). The user has already narrowed down the search results and what appears is exactly the array of products they desire.
That person’s purchase intent is also greater than someone searching on Google, based on the nature of them browsing an online retailer that encourages instant purchase and specific keywords. For Burt’s Bees, their AMS ad campaign resulted in a purchase intent four times greater than their campaign average. On Google, your business may show up in the search results for a keyword, but the user is not as motivated a buyer as they are on Amazon.
It’s true that Amazon has quite a bit of ground to cover in the realm of ad revenue in order to adequately compete with Google and Facebook. However, its potential to do so is truly impressive. Having already secured the spot as world’s largest online retailer, it has accrued a loyal and motivated audience. Additionally, Amazon’s advantages as an e-commerce site include factors crucial to advertising success: high purchase intent, focused keywords, and easily segmented and targeted audiences. So sound the warning bells in Google HQ: Amazon has taken over online shopping and is now turning its attention to digital advertising.