Amazon’s Ad Revolution

October 3, 2018

In September Amazon became the second company to reach a market valuation of 1 trillion dollars, joining Apple as the only two to reach this milestone.

Amazon’s exponential growth over the past 21 years has changed the world in more ways than one, from the way we buy our goods, to how we read books or listen to music, to name just a few. On top of that, they’ve fundamentally changed how to market and sell products online and redefined something as simple as ‘next day delivery’.


A New Frontier

According to analysts, Amazon has only just scratched the surface of its growth potential, particularly in the ad space. Digital advertising revenue has been dominated by Google and Facebook for years, but Amazon has set its sights on breaking that duopoly and that will present opportunities for digital marketers around the world.

Amazon’s current market share of ad revenue sits at 4.1%, a mere drop in the ocean perhaps compared Google’s 31.1% and Facebook’s 20.6%, which combined represents over half of the $88 billion ad market.

Amazon does however have certain competitive advantages over its more mature rivals, not least its ability to harvest the data it holds on buyer behaviours within its platform. Whilst Google might know what people search for and Facebook can leverage demographics and social connections, Amazon knows what consumers actually buy. In the game of maximising sales, that is a significant step ahead from its competitors as it aggregates this data across almost every vertical and marries up with users lifestyles.


Challenges Ahead

Agencies have certainly explored the value propositions in Amazon’s ad jungle, particularly in product search and audience planning. Problems have included a lack of expertise and support in using Amazon’s ad platform and a lack of demand from clients, given that most are classed as wholesalers. Some advertisers have complained that the user experience is poor, increasing the time required to manage campaigns and in turn leading to a whole cascade of increased costs and decreased ROI.

It’s worth keeping in mind that several years ago Facebook suffered from many of the same complaints but it’s increasingly clear that Amazon are learning the  functionality and transparency that is important to advertisers. For fashion brands they’ve created a cleaner looking search page with a white background and removed clutter. “A few years ago, everyone laughed at the idea of buying luxury through Amazon but it’s starting to happen”, says Tom Manning, Head of Strategy at ForwardPMX.

We can be sure that Amazon will continue to make strides in improving the platform as they also push to grow this sector. Meanwhile the more advertisers you see appearing on the site, the more everyone else will be under pressure to follow suit. It will be a race to the top as businesses and agencies work to harness and commoditise the vast trove of data that Amazon has on it’s users.

For marketers everywhere, the advice can only be to watch this space.

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