Advertising Is Growing Amazon's Business, So Let Amazon Help Grow Yours Too
One of the largest shows in the world for brands and private label sellers on Amazon recently wrapped in Las Vegas. The Prosper Show, is an annual conference focused on sharing best practice education and providing networking for established brand manufacturers and Amazon sellers. One of the event’s keynote speakers was Collin Colburn, an analyst from Forrester Research who covers digital advertising, shared some great takeaways about how Amazon is growing its advertising business -- and how you can use it to give your own venture a boost.
Amazon is now the third largest seller of digital advertising in the US, third only to Google and Facebook. Forrester estimates that Amazon did $10 billion in worldwide advertising sales in 2018, a whopping 117 percent increase over 2017.
Colburn’s take is that Amazon’s strong and growing ad business helps many of Amazon’s other business units. For example, as brand manufacturers and sellers buy more advertising from Amazon, more products get sold, making Amazon’s top line revenue grow even stronger.
But why Amazon advertising and why now? 24 years in, Amazon is still attracting a ton of people to its site. It’s estimated by Forrester that in 2018, 200 million Americans visited Amazon’s website. That’s over two thirds of the US adult population and is tied with the number of Americans who visit Facebook annually.
28 percent of Americans reported to Forrester that they used Amazon to research their most recent retail purchase, and 25 percent said that when hunting for a new purchase, they opted to look at the product in the store. So not only does Amazon have substantial traffic, when those people do go to the site, they are actively looking for new products.
Here are Colburn’s five “to do’s” for your brand’s Amazon ad strategy:
Learn your customer’s life cycle. According to Colburn, there are six customer life cycle stages that Forrester has been talking about for ten years: discover, explore, buy, use, ask, and engage. Each customer of yours is in one of these six life cycle stages, learn about each one.
Use the channels that support each stage of your customers life cycle. Colburn told the Prosper audience that most sellers are capturing new customers in the explore and buy stages on Amazon. He encouraged sellers start earlier in the life cycle (i.e. the discover stage).
Determine the right media mix. He mentioned that this is a challenge for large consumer packaged goods (CPG) brands, likely because they may be still in traditional media mix spend models. He said digital advertising will grow from 45 percent of all advertising to 57 percent by 2023, so make sure digital is getting a fair share of your brand’s budget.
Acknowledge that in-store sales still matter. While 84 percent of all US sales will be transacted offline in 2019, 36 percent of those offline sales will be influenced by digital. Colburn noted that the majority of the dollars that are moving to Amazon advertising from brands are moving there from shopper and trade marketing budgets not off of Google and Facebook.
Do not over-index on ad spend on Amazon (versus all other channels). He encouraged brands to start testing ads on other retailer’s websites including Walmart, Target, Best Buy and even Kroger. Of course the size of your marketing budget matters, you don’t want to be spread thin, but to the extent that you’re under-indexed on digital, spend as much as you can without a decline in return on ad spend (ROAS) on Amazon, then look into these other websites and apps (providing your product is sold there).
Whether you want to explore the possibility of getting started with Amazon Advertising as a first party vendor to Amazon or a brand seller on the Marketplace, or you’re a seasoned brand executive wanting to get a jumpstart on your potential for further growth, you owe it to your company to explore Amazon advertising as a channel for acquiring new clients and grow your overall revenue.