It’s easy to over hype things, but 2018 will be remembered as a momentous year for Amazon’s advertising business. It is estimated to now be the third-largest ad seller in the U.S. behind Google and Facebook with 4% market share (keep the over-hype in check). What will fuel further advertiser investment are the kinds of product changes and developments we saw this year.
Amazon still categorizes its ad business under an “other” line item in its earnings reports, but that segment topped $2 billion for the first time in Q1 and continued to see triple-digit growth year over year in the following quarters, reaching $2.945 billion in Q3.
From our own Amazon Advertising Forecast 2019, based on a survey of more than 600 marketers, what stood out is the amount of runway ahead for Amazon advertising in terms of growing advertiser adoption, investment and development. Of the 80% of respondents who said they plan to increase Amazon advertising budgets next year, 60 percent expect to spend as much as 25% of their annual digital ad budget on Amazon. More than half plan to fund increased spend with incremental budget, 30% plan to shift budget from search, 24% said budgets will come from display or other non-digital budget lines such as print or TV and 21 percent said budgets will come from paid social.
We asked several Amazon marketers for their thoughts on the biggest changes in 2018 and what they mean for advertisers and Amazon sellers in the year ahead.
Unified branding and systems
In September, Amazon retired its disparate ad product brands — Amazon Media Group (AMG) for managed display and video services, Amazon Marketing Services (AMS) for seller ads on Amazon and programmatic solution Amazon Advertising Platform (AAP) — and unified them under the umbrella Amazon Advertising brand. It also renamed Headline Search ads Sponsored Brand ads and the Amazon Advertising Platform is now Amazon DSP.
The company also has plans to consolidate its platforms for sellers. As Recode first reported, Amazon is expected to launch One Vendor, a system that combines its Vendor Central (retail) and Seller Central (third-party marketplace), in the first half of next year. Earlier this year, Bloomberg reported that the company has merged its retail and marketing operations teams under Doug Herrington, SVP of Amazon’s North America consumer business.
As evidence that Amazon made advertising a priority in 2018, Bryant Garvin, head of advertising at Pattern (formerly iServe), pointed to Amazon’s recent hires from Google, Twitter, Facebook and other major ad sellers and the roll out of more features that were once available only to Amazon’s retail division. Sponsored Brands, Garvin noted, were once available only in Vendor Central, and Sponsored Products gained added functionality such as category, brand and ASIN-level targeting.
Interface and API saw big updates
Amazon’s campaign management capabilities still lag behind that of Google, but the company made many improvements this year. Todd Bowman, senior director of Amazon & eRetail at performance agency Merkle, said Amazon’s enhancements to the advertising UI and API were among the biggest changes the company made in 2018.
In the UI, the changes made it easier to manage Search accounts on Amazon, said Bowman. These include updates to the reporting console, including the ability to filter and customize date ranges. More recently, Bowman pointed out, Amazon added Enhanced Budgeting control, which lets advertisers set portfolio budgets across campaigns. “By utilizing these portfolios to create a budget, advertisers now have a solution to set an overall budget across the account for a specific date range and essentially solve the issue of account level budget pacing,” said Bowman.
The API upgrades, said Bowman, are “significant because integrators have been able to build tools that provide numerous opportunities for account management automation and bulk updating.” He cited three new capabilities, including bulk updates at multiple campaign levels; reporting parity between Seller Central and Vendor Central advertising programs with API support for Search Query and Purchase Product reports; and automated bidding via the API for Sponsored Product and Sponsored Brand ads. Merkle built and integrated its own internal bidding tool to manage client campaigns at scale.
Sponsored Brands gained inventory
Amazon added more inventory for Sponsored Brands this fall. In addition to showing at the top of search results pages, the ad units can appear in the left-hand rail on desktop, below the fold on desktop and mobile and every thirteenth slot on mobile.
This was also one of the most significant changes Amazon made this year, said Bowman. Sponsored Brands consistently deliver higher click-through rates than Sponsored Products or Product Display ads (which added video capabilities this year), said Bowman. “Because of the strong performance from these ads, adding additional placements on the [search results pages] for these ads is a big change that will benefit advertisers.” Bowman said that more impressions may cause CTRs to fall, “but the change will be an overall gain for brands as it will give them more opportunity to show an ad with multiple products and ad copy that can entice the customer.”
Growing need for ‘hybrid’ approach to marketing on Amazon
Brittany Page, associate director of SEO at 3Q Digital, said a number of elements put downward pressure on organic real estate, including the additional Sponsored Brands placements, expert recommendations, video-based buying guide and Amazon’s own private-label products, which are often flagged as “Top Rated from Our Brands”). Page expect organic real estate to continue to shrink, but said optimization and merchandising will remain critical. “Instituting a hybrid optimization approach of organic and paid campaigns will be the best strategy for brands looking to maximize their visibility,” advised Page.
Garvin also highlighted the need for sellers to be thinking holistically when it comes to marketing on Amazon. “More so this year than any in the past,” said Garvin, “it isn’t simply enough for someone to create a good product and ‘list it’ with the right titles and descriptions to rank organically. It is truly requiring great products and content on the detail pages, strategically being amplified with advertising to drive the increase in DPV (detail page views) and sales that Amazon’s organic algorithm is taking into account.”
Attribution and analytics advancements
“With all that Amazon Advertising accomplished in their coming out year as a true enterprise-ready advertising channel, there is one standout agenda launched this year that will really change the game going into the coming years for large sellers and brand manufacturers advertising on the channel: Attribution and Stores Analytics,” said Nich Weinheimer, VP of e-commerce at advertising platform Kenshoo.
Amazon Attribution is currently in beta. Amazon launched analytics for Stores in March, showing stats such as daily visits, page views, sales and sales units by page and traffic source.
“As Amazon manages toward profitability and a ‘hands-off-the-wheel’ approach in ‘platforming out’ their solutions,” said Weinheimer, “exposing the customer purchase-path on Amazon via Attribution Beta and Stores Analytics marks an historic moment for the tech giant.”
Having the ability to see what sources are driving traffic to Stores pages means brands can drive traffic from other channels and attribute sales back to those channels. “Brands without e-commerce D2C [direct-to-consumer] plays — think large CPG and consumer electronics suppliers — are now armed with the tools to leverage Amazon as their D2C play, able to expand advertising efforts from Facebook, other consideration channels or display media from outside Amazon to drive trackable performance on their largest e-commerce retail channel,” said Weinheimer.
He predicts other online marketplaces to build out similar PPC advertising solutions for brands in 2019. “But Amazon is now arming its brand suppliers with the tools to pull even more traffic to its site from across the web, and the brands are happy to foot the bill.”
Storefronts launched for SMBs
For smaller brands and sellers to showcase their wares, Amazon launched Storefronts in September.
Tanya Zadoorian, senior marketplace channel analyst at CPC Strategy, also said the release of more sophisticated metrics for Storefronts and Stores this year were significant. “We’ve seen businesses leverage social media and Google text ads to drive traffic back to Amazon Storefronts to increase their visibility across channels,” said Zadoorian.