2020 is the year that Amazon is doubling down on its efforts to lure ad spend away from rival platforms Google and Facebook. By increasing its Amazon Advertising offering, the company is providing huge opportunities to those brands willing to invest to reach new and existing customers – and it’s only going to get more lucrative.
The company is now the third-largest advertising platform behind Google and Facebook, but Amazon’s ad revenue is growing six times faster than its rivals. Financial services firm Cowen surveyed 50 US advertisers to gain insight into the growth of the Amazon Advertising platform and predicted that Amazon will make $17.6 billion (£13.5 billion) in advertising revenue this year – an increase of 36% over just 12 months.
On top of this, Cowen found that Google Ads was the biggest platform from which advertisers were pulling budget in order to fund their increased Amazon Advertising presences. Over half (56%) of advertisers went onto say they would be reducing spend across other platforms such as Snapchat, Microsoft Ads and Pinterest.
Why are advertisers pulling spend from Google?
Amazon Advertising spending has increased rapidly over recent years, and the data indicates this growth has firmly been at the expense of Google and Facebook. There will inevitably be industry factors for brands to consider when reviewing advertising budget allocation; for example, Amazon is clearly more viable for manufacturing and retail brands, though not as suitable for others.
However, there’s a clear “bottom line” factor in play: the vast majority of advertisers are finding that their average cost per click (CPC) is lower on Amazon than on Google. In addition, a Nanigans study from early last year concluded that 39% of advertisers found that Amazon offered a better return on ad spend than Google, while only 20% claimed the reverse. Furthermore, 61% of Cowen’s respondents which use Amazon Advertising are planning to invest additional budget on the platform in 2020.
Having worked across Google Ads for over five years, I’ve seen average cost per clicks steadily increase year on year, putting heightened pressure on conversion rates in order to achieve the expected return on investment. Seeing this trend continue will likely encourage advertisers to seek alternative opportunities.
Furthermore, the increased adoption of marketplaces has had a dramatic influence on the online purchase journey and should also not be ignored when reviewing ad spend allocation.
Over the past decade, brands have spent the lion’s share of their marketing budgets on driving users to their own websites. Now, many of these are seeing their website conversion rates remain static or even fall, despite increased investment in UX.
This is undoubtedly caused by the change in buyer habits; consumers are now more likely to visit a brand’s website, show intent, then transition to Amazon in order to continue their research (through customer reviews and competing products), or complete the purchase knowing they can benefit from Amazon’s superior fulfilment capabilities (free fast delivery and easy returns).
More than just an advert
In order to truly benefit from this shift in user behaviour, it’s vital to not only be trading on Amazon, but also advertise with it.
One of the most powerful incentives for businesses to explore Amazon Advertising further is that it's an investment. A well-planned strategy will not only increase sales volume in the short term, but also boost the brand’s organic product rankings.
Unlike on Google – where a brand’s PPC campaigns run (for the most part) in isolation to its SEO strategy – the Amazon ranking algorithm predominantly focuses on sales data, meaning that each time a sale is made from a paid advert, there’s a positive impact on its organic ranking.
Advertising on Amazon is undeniably highly valuable among brands that sell products on the platform, especially when it comes to driving sales and acquiring new customers. There’s still a way to go before Amazon’s ad revenue catches up to Google and Facebook, but at the rate its growing – in conjunction with how Amazon’s offering is developing – advertisers should never neglect the platform in their marketing strategies.