Amazon: Is Privacy A Catalyst For Higher Ad Costs?

Advertising on Amazon now costs, on average, $1.20 per click -- up 29% from January 2021 and 51.9% from June 2020, according to data released Monday. The average cost in the U.S. of selling on Amazon increased, from between $6 and $7 per sale in 2020 to between $9 and $10 today.

The average conversion rate has remained stable, according to data from ecommerce intelligence firm Marketplace Plus, cited by Warc. The data suggests the trend is being seen across other countries, too. The data attributes the rise in price, partially to large brands shifting their budgets to ecommerce platforms.

Rising advertising costs are likely to continue as brands spend to reach consumers who spend more with them.

Cost may also be rising as Amazon strengthens its position to reach into other industries. The Merkle Digital Marketing Report Q1 2021 released in May noted the growth of Amazon’s Sponsored Brand ads remained strong year over year, with clicks up 38% and spend up 26%.

Impressions for the format grew 133% YoY after Amazon opened new placements for Sponsored Brands throughout 2020. Sales growth did not keep up with click growth, though, and Sponsored Brands’ relative sales per click compared to Sponsored Products fell to 75%.

Sponsored Products also experienced YoY click growth -- although at more modest levels, at 11%. A 10% YoY drop in CPC led to virtually flat YoY spend.

Sales growth, however, remained strong at 36%, and Sponsored Products still captured the majority of spend share across Sponsored Products, Sponsored Brands, and Sponsored Display.

The steps Amazon continues to take to protect consumers might be the key behind the company’s ability to charge more to advertise across its properties. Similar to the way consumers are willing to pay more at high-end retailers that provide excellent customer service and support.

Although many marketers may not be aware, Amazon has historically limited third-party tracking on its owned-and-operated properties, Mika Takahashi, ecommerce retail media associate director at Merkle, and Jordan Sagisi, senior director at Merkle, wrote in an email to Inside Performance.

“Protecting Amazon’s intellectual property and customer data makes sense,” they wrote.

Amazon continues to build out owned-and-operated properties with devices like Fire TV and Alexa, via Twitch and connected TV, and with acquisitions of content creators like MGM.

And while these moves have become attractive to advertisers, it’s too early to determine how big internet companies will work together to protect user privacy while working with advertisers to reach consumers in a relevant way.

“We believe the focus will be on supporting advertisers who buy media on Amazon that understand the differences between addressable and unknown audiences, and how to best utilize data and modelling to create effective advertising campaigns,” Takahashi and Sagisi wrote.

1 comment about "Amazon: Is Privacy A Catalyst For Higher Ad Costs?".
Check to receive email when comments are posted.
  1. John Grono from GAP Research, June 22, 2021 at 7:47 p.m.

    So that is a CPM of $1,200.

Next story loading loading..