By Hannah Redmond, Group Strategy Director, The Marketing Arm
Amazon has become the largest online retailer in the world attracting 180 million U.S. visitors each month – all or most with shopping on their mind. Some analysts predict AMZN shares will reach $2,000, making it the first company with a $1 trillion market value.
With various acquisitions, a robust web services strategy, and their strong push into media and advertising with Amazon Media Group, there seems to be no stopping them. And, while Amazon Web Services (AWS) has historically driven most of Amazon’s revenue, experts predict that Amazon’s advertising revenue will surpass that of AWS. Analysts point to Chinese e-commerce giant Alibaba Group Holding Ltd., as a sign of what’s to come as Alibaba currently earns more than half its revenue from ads.
Amazon’s ad revenue could reach $4.5 billion+ in 2018, a 61% increase from $2.8 billion in 2017, according to JPMorgan. While it’s still behind Facebook and Google, recent privacy concerns and potential regulation of the social networks driving investments down may actually allow for Amazon to play a little bit of catch-up.
Why is this happening now?
Advertising is one of the most lucrative businesses on the web. By 2021, advertising on websites and mobile devices will account for half of all ad spending in the U.S., capturing greater share than television, radio, newspapers and billboards combined, according to eMarketer.
Amazon has been setting the foundation for an extremely robust advertising offering for years and has gathered a loyal customer base. Historically, Amazon has kept advertising on the site subtle for fear of alienating shoppers who had become used to choosing what to buy based largely on customer reviews and price, but they’ve slowly been giving more prominent placement to sponsored products in search results, forcing brands to buy ads to win top billing.
Fifty-five percent of consumers now turn to Amazon first when searching for products online, rather than simply relying on Google, as was the tendency in the past. This – in combination with the immense amount of shopper data the company is collecting from its retail platform and continuous acquisitions – makes it an ideal place for advertisers to push their products. Additionally, the company is earning brands’ attention for creating innovative new ways to engage consumers (i.e. Voice).
How is this changing the game?
Just as big brands pressed their ad agencies a few years ago to devise plans to get the best bang for the ad buck with Google and Facebook, they’re now demanding an “Amazon strategy.”
And, with Amazon’s advertising revenue predicted to surge in 2018, many agencies have also begun to create specialty Amazon practice areas where they’re investing in knowledge and expertise around the entire Amazon ecosystem to help their clients strategize and invest efficiently on the platform. As marketers, we need to understand the Amazon opportunities and ecosystem better as the company shows no signs of slowing down.
This is a lot. What do I do now?
First, get educated on the various Amazon ad offerings across all of its platforms. The company offers a plethora of ways to advertise, all of which present customers with relevant ads that enhance their shopping experience (on and off the platform). Additionally, see what other brands have done to utilize the Amazon ecosystem.
Second, consider the entire Amazon ecosystem when ideating: if you’re a CPG brand looking for an e-commerce way-in, is there also a delivery innovation element (Prime Now; Amazon Lockers) or a voice element (Voice Deals; Alexa Skills) you can consider as well?
Third, think about your current Amazon strategy. Is there one? What is your current Amazon presence?
If you’re curious about developing your Amazon strategy, reach out to TMA as we’re an agency built to help brands engage along the entire consumer journey.