Commentary

Why Brands Can't Afford Not To Advertise On Amazon

Facebook and Google have long held the lion's share of advertising dollars, but Amazon is quickly growing its influence in the space, surpassing $2.2 billion in ad revenue in Q2. While still small in comparison, the ecommerce giant is on track to become the third largest ad player in the U.S. With each passing day, it’s becoming more clear that brands can’t afford to ignore Amazon.

For brands from retail to CPG to pharmaceuticals and beyond, Amazon’s move into digital advertising presents a classic case of “if you can’t beat them, join them” -- because if you don’t advertise with Amazon, your competitors surely will. Here’s why.

Advertising Where Customers Search and Shop
Mary Meeker’s latest Internet Trends report credited Amazon with owning $129 billion of e-commerce gross merchandise value (GMV), a 28 percent share of the market. But perhaps more impressive is that 49% of all product searches now begin on Amazon--it’s essentially a massive search engine with the ability to fulfill purchases. Now, more than ever, Amazon is both the beginning and the end of the modern customer’s journey.

advertisement

advertisement

High Stakes Brand Conquest
In traditional search marketing, brands have grown accustomed to bidding on their own brand terms because if they don’t, a competitive brand will undoubtedly buy those terms and appear at the top of the search results. The idea is that Advil, for example, could buy a brand term for Tylenol and snag the click on Google. We call this brand conquest.

Amazon offers this same threat (or opportunity, depending on how you look at it), but with even higher stakes because consumers are further along the purchase funnel. As customers move from search to purchase, brands on Amazon must be more active in protecting their turf, or risk losing prospects to competitive products.

This battle takes place at all stages of the buying process, across several different ad formats. Headline Shopping Ads are banner-like ads that help drive awareness and let advertisers display a range of products on the landing page. Sponsored Product Ads are helpful during the consideration phase, allowing advertisers to move up the search results page. Finally, Product Display Ads are focused on the conversion stage, giving an advertiser one last shot at the customers as they are ready to Add to cart.

Alexa and the Power of Voice
The evolution of voice technology has scaled quickly, with far-reaching implications for ecommerce and advertising.

Amazon is clearly ahead of the pack. According to comScore, 50% of all searches will be voice searches by 2020, while other reports estimate that Amazon’s U.S. market share of voice assistants, or smart speakers, is between 70% to 76%.

This is one area of advertising where the other giants need to catch up. For example, recognizing Amazon’s dominance in the space, Google recently launched Google Shopping Actions as an attempt to monetize voice search on the transactions. If Google and Amazon focus on capturing value from the transaction, Alexa and Google Home could be surprisingly free of traditional “ads.”

While Amazon is not yet primed to surpass Google or Facebook in terms of advertising revenue, its continued growth in the space and its captive, purchase-happy audience should be enough reason for brands to begin experimenting with the platform.

With Amazon, the customer journey is condensed -- search and purchase can happen without leaving Amazon’s site. If brands aren’t already advertising there, they risk being blown away by competition when consumers are in buying mode.

5 comments about "Why Brands Can't Afford Not To Advertise On Amazon".
Check to receive email when comments are posted.
  1. Ron Kurtz from American Affluence Research Center, August 30, 2018 at 2:19 p.m.

    I understand the attraction of having exposure on Amazon, but I would not expect much in the way of sales results unless I had a pricing or product feature advantage or had exclusive distribution. 

  2. PJ Lehrer from NYU, August 31, 2018 at 3:16 p.m.

    People are letting Alexa make decisions for them.  Amazon is now a must.  More here...
    http://pjlehrer.blogspot.com/2018/08/tell-me-something-good.html

  3. John Grono from GAP Research, August 31, 2018 at 9:09 p.m.

    Wes, there is a massive difference between building sales and building a brand.

    I would posit that advertising on Amazon is great for sales but not for building a brand (apart from the Amazon brand of course).

    Way too much focus by 'marketers' is (rightly or wrongly) on immediate sales targets and not long-term brand building.

  4. Ron Kurtz from American Affluence Research Center replied, September 1, 2018 at 2:13 p.m.

    WithJohn's focus on sales results, I wonder if he appreciate that Amazon is primarliy a convenient way for consumers to compare pricing for identical products. The more product features and pricing differ and that distribution is readily accessible, the less useful Amazon becomes.

  5. John Grono from GAP Research replied, September 1, 2018 at 6:06 p.m.

    Yes Ron, that is exactly the point I am making.   Pricing and distribution are primarily sales functions.   A 'strong' brand needs brand values and brand differentials.   For 'affluent' brands Amazon could in fact be deletorious.

Next story loading loading..