As the US slowly begins to emerge from the effects of the pandemic, there's no aspect of any retail business model that has been unaltered as a result.
Amazon may not be the only example, but they're certainly one of the most prominent.
To say 2020 was a very good year for Amazon would be an understatement. While the retail giant may have seen a 38 percent year over year growth, there's one segment of Amazon that remains underreported.
With a 47 percent growth rate during 2020, Amazon's business segment is actually growing faster than Amazon itself. The only thing more surprising?
That segment consists largely of Amazon's advertising business.
Google, Amazon and the Digital Advertising Boom
Digital advertising may seem to be dominated by Google, but there's a secret weapon that's driving Amazon's advertising growth: its sellers.
A recent survey from Feedvisor found that 73 percent of all brands and sellers on Amazon actively purchase advertising on the platform, contributing to an impressive $21 Billion in revenue.
And it's paying off. Feedvisor's survey also revealed that 83 percent of all brands are seeing at least a 4x ROI as a result of advertising on Amazon.
While brands may have long recognized the importance of integrating Amazon as a sales channel, the rise of third-party sellers over the past few years is one that's transforming the digital marketplace—advertising and marketing, in particular.
Amazon marketing services are unique in the world of digital marketing. Amazon ad products both analyze and enhance campaign performance on the same platform which directly competes with third-party sellers. Chiefly, Amazon itself.
But what are some of the key Amazon marketing strategies sellers are utilizing?
PPC and Amazon Ads
Approximately three quarters of all sellers on Amazon are currently using pay-per-click (PPC) advertising as a key sales driver. While PPC strategies have long been part of the digital advertising mix, resulting in a conversion rate of up to 50 percent, it's only been recently that the vast majority of sellers have begun to realize its ultimate value.
PPC and sponsored ad formats on Amazon
But the value of PPC can fluctuate depending on the sponsored ad types sellers are using. A recent survey from Jungle Scout found that of the 75 percent of sellers using PPC, the vast majority (88 percent) are using sponsored product ads while 32 and 43 percent are using Amazon sponsored product ads (including headline search ads) and product display ads respectively.
What makes PPC such a valuable commodity is the fact that Amazon's A9 algorithm will take into account both organic rankings as well as sponsored products ads when calculating search results. Yet few consumers seem to be aware that sponsored product display ads are actually paid ads.
But if they do, it doesn't appear to be an overwhelming concern. It's been estimated that the average Amazon conversion rate from paid advertising can reach as high as 13 percent and all the way up to 74 percent for Prime customers. In comparison, the average global conversion rate across all devices and sites other than Amazon is approximately 1.3 percent.
PPC may result in high conversions. But is it cost effective?
PPC and budgeting for Amazon ads
Not only does its value fluctuate, but its cost does as well. Sponsored ads as a result of PPC are awarded to the highest bid via auctions, with the cost per click growing increasingly more expensive. There's no flat fee for a PPC ad—a factor that many unprepared sellers often fail to strategize for adequately.
While a general rule of thumb is to allocate only 5 percent of their total advertising budget towards PPC, there's no accurate way to establish an optimal budget until sellers have a retail ready product with an established sales history. At a bare minimum, that includes:
At least 15 Reviews over a 90 day period
At least 4 high quality images
A full product detail page optimized for search results, including a product description with title and price
In a marketplace largely dominated by an influx of similar products, developing a retail ready product line on Amazon can sometimes seem like a crowning achievement as opposed to a first step—particularly for new brands who have yet to launch an Amazon store.
So how do new to market brands gain more sales on Amazon if they haven't even achieved optimal product visibility yet?
By emphasizing relatable content as much as they emphasize their product.
A+ Content and Amazon Advertising
A+ content integrates enhanced images, 360⁰ spin images, brand narratives, storytelling, and streaming video into one dynamic user experience that can demonstrate both the benefits of a brand as well as reflect products in everyday real life.
While PPC can be considered a tool to maximize product visibility, A+ content is a tool to maximize relatability—the strongest selling point a brand can hope to achieve.
Yet it's still an untapped tool for many sellers. Less than a quarter of all third-party sellers have been estimated to use A+ content as part of their marketing campaigns.
That may be because Amazon doesn't index search results based on A+ content on its own. Less competition doesn't always equal more sales. Sellers still need to develop a keyword-focused advertising strategy alongside enhanced brand content like A+ if they hope to maximize product visibility.
But even Amazon advertising comes with its own unique challenges sellers need to confront before even thinking about their success on the platform.
The Challenges of Amazon Advertising
One of the key dilemmas Amazon presents is that it's a constantly evolving platform, making consistency difficult to track. Formerly reliable solutions can be rendered obsolete as new innovations emerge.
At the same time, developing solutions haven't necessarily yet proven their efficacy. Consumer habits are never stagnant. Consumer touchpoints are never stagnant. And neither is digital advertising.
Not only is it constantly evolving, but there's no such thing as an ideal advertising mix. Each brand may have their own particular strengths and weaknesses, but both can impact the entire customer journey.
As solutions evolve, the need to identify appropriate methods can seem daunting for many sellers lacking a background in marketing—particularly if they're a one person shop.
To add to this challenge, the need to drive and measure the return of off-Amazon traffic is a significant one. While over 50 percent of digital consumers may begin their product searches on Amazon, there's still a remaining 47 percent which are yet to be tapped.
Amazon may have addressed this by introducing newer solutions such as Amazon Attribution designed for merchants who cross sell on channels off Amazon. But optimizing external traffic requires both foresight and agility; both of which can leave brands feeling overwhelmed by the sheer wealth of solutions available.
That's why relying on Amazon advertising alone can be virtually fruitless if there isn't a human element guiding a campaign.
The Future of Amazon Advertising
While Amazon's retail revenue has been predicted to more than double over the next four years, recent estimates place Amazon advertising's growth at $40 Billion by 2023—an increase of 470 percent from 2018.
As Amazon continues to dominate eCommerce, Amazon Advertising has already emerged as a key player in digital advertising. And as Amazon expands into previously uncharted territory, so will its advertising division.
AI solutions have already become mainstream, and there's little room for doubt that Amazon will take advantage of them to provide even more precise marketing solutions for brands and sellers a like.
But where does that leave the human element? The answer is simple. At the intersection where brands and their audience meet.
Product visibility on Amazon isn't a question of the right advertising. It's a question of maximizing the right mix of advertising. Find out more at Color More Lines.