Sponsored product listings on search results are the meat and potatoes of Amazon’s advertising revenue. But video is the future, and is Amazon’s most important differentiator compared to other retail media platforms.
When people think “Amazon video,” they often mean the Amazon Prime Video library, said Vinny Rinaldi, head of investment and activation for the GroupM agency Wavemaker – which he joined in April, after a stint as principal of programmatic partnerships for the Amazon DSP.
But what agencies mean when they talk about Amazon video is Fire TV, where Amazon sells a rough 30% cut of inventory on the streaming TV platform.
Fire TV’s footprint spans about 50 million US homes, and it is the only place where TV-style video ads can be tied directly to sales, Rinaldi said.
Amazon started a programmatic partner program for Fire TV in 2018 with dataxu and The Trade Desk. But it’s since abandoned the partnership route. Now, the Amazon DSP is the only way to buy Amazon’s Fire TV inventory. (A critical detail: advertisers can still get into Fire TV without Amazon, because programmers hold their 70% of the inventory to sell themselves. But only the Amazon DSP can juice those buys with logged-in Amazon data or attribute ads to online sales.)
Conquesting is the name of the game on Amazon.
Search for “Banana Republic Shirts” on Google, and the page is dominated by organic listings for Banana Republic. By placing competitors’ ads over Banana Republic, Google would be interfering with that user’s clear intent to find Banana Republic shirts.
The same search on Amazon, however, will surface Amazon-owned brands and Banana Republic competitors atop the page.
The downside is that conquesting is expensive. Someone searching directly for a brand knows that’s what they want to purchase, so relatively few will divert to a different brand. Often, the conquesting brand must drop its price, further squeezing its profit margin, George said.
Conquesting drives up ad rates because companies have to spend defensively on key search terms. Also, some brands are willing to sacrifice profitability to gain market share in ecommerce.
Some brands begrudgingly advertise on Amazon because they see rivals swiping customers who search directly for their products, said Prerna Talreja, biddable media co-lead at the agency Crossmedia. Running TV campaigns in a market will lead to a bump in searches for their product on Amazon in those areas – but without sponsored listings, all the value generated by their own paid media accrues instead to a competitor, she said.
“Whenever we do any kind of advertising across any channel, it doesn't matter what it's pointed at, we always see an uptick in searches on Amazon,” said Jeremy Sherman, director of marketing and growth for the vegan snack brand Snacklins.
That halo effect, where any media investments drive down funnel to Amazon sales, is an important reason why Snacklins now spends more on Amazon search terms than on Google, Sherman said.
Refined targeting and measurement
Amazon has been known for its “clunky” ad platform. But the company is making progress to catch up with the likes of Google and Facebook, whose platforms allow buyers to merge or overlay data and create infinite varieties of audience segments.
Yoto, a smart audio device toy brand, can build an audience on Instagram containing parents of young kids, or people who follow children’s education topics, while layering in demographic or behavioral data. On Amazon, it’s limited to people who visited their product page or broad, black box Amazon segments based on purchase and search data, said the brand’s performance marketing manager, Matthew Ralph-Savage.
It’s using an axe instead of a scalpel; But sometimes that’s the right tool.
Amazon is refining its targeting and measurement with a cloud-based data clean room in beta.
Amazon’s clean room is more nascent than Google’s Ads Data Hub, where the Google ad server data is housed, Talreja said. But Amazon’s clean room creates more opportunities to leverage Amazon shopping data.
For example, the Amazon DSP has an attribution window of 14 days, she said. Using Amazon’s marketing cloud, advertisers can test longer attribution windows.
“One of the most interesting features (of Amazon’s clean room) is the online-to-offline measurement,” she said. Brands can bring their own sales data to Amazon’s marketing cloud, and do incremental testing to understand how Amazon ads impact overall retail sales.
If a deodorant brand owns the top spot on Amazon, how does that impact perception of the product? Will people who see that deodorant atop the Amazon rankings be more likely to buy the brand later in a pharmacy or grocery store? Those are questions brands can address with clean room data.
Big-name brands are also trying to figure out whether ecommerce is a profitable venture.
Consider that same deodorant brand. Selling a single stick of deodorant on Amazon may actually be an unprofitable proposition. The cost to ship the product to someone’s door erases the profit margin on any small purchase.
Many traditional retail brands are taking a loss on Amazon sales right now, as they figure out ecommerce, and since they don’t want to cede market share in ecommerce even if it means eating their profit margin, George said.
Amazon’s own advertising metric underscores this measurement challenge. Amazon’s version of ROAS (Return on Ad Spend) is called ACOS (Advertising as a Cost of Sale).
The metric is a reminder that, on Amazon, advertising isn’t the thing itself. For Amazon, advertising is one of many factors, including pricing, warehousing, shipping and delivery, that are all interwoven into how brands achieve a sale.
Brands are accustomed to shipping pallets of hundreds of items to retailers, not to getting individual products to people’s doorsteps, George said. This type of selling requires adjustment. “Amazon data is the way they’re figuring out how and whether ecommerce will work for them.”