Amazon Advertising strategy: opportunities and challenges
This article provides insights into the opportunities & challenges of Amazon Advertising for domestic and international Amazon sellers.
Amazon is the leading digital retailer and one of the most frequently visited web properties in the US. According to eMarketer, by 2021, nearly one in 10 US digital ad dollars will go to the platform.
The platform’s leading position goes hand in hand with high competition among Amazon sellers. Thus, Amazon Advertising is growing. According to Marin Software, ecommerce ad spend rose 115% (Q3 2019 vs. Q3 2018) and Amazon was a key player.
In this article you’ll learn about:
- Ecommerce opportunities of using ads on Amazon (e.g. the possibility to increase product visibility & make data-driven decisions)
- Amazon Advertising challenges (e.g. reaching a plateau with ad campaigns & inadequate ROI) & how to overcome them (minimizing CPCs, finding markets with less competition)
- The Amazon advertising plan in a nutshell, international advertising opportunities, expert advice & more.
Amazon Advertising & its growing role
Amazon is one of the leading global marketplaces. The platform is very popular among online shoppers: some of them are so loyal to Amazon that they won’t even consider purchasing products off Amazon! As a result, both sellers and buyers are flocking to the platform.
Even though the facts below are predominantly about the US market, Amazon is a major ecommerce player in many countries around the world.
5 ecommerce facts about Amazon
- Amazon is now the third largest digital advertising platform in the US after Google and Facebook.
- Amazon accounted for almost 9% of US digital spend in 2019 (increase from 6.8% in 2018) (eMarketer).
- Amazon is likely to retain its dominant ecommerce position. It accounts for nearly half (47%) of total US ecommerce sales and 5% of the total US retail market (eMarketer).
- Amazon’s ad business will grow overall as it diversifies ad offerings beyond display ads and across its variety of popular platforms (Amazon.com, Twitch, mobile app, IMDb’s Freedive) and devices (Fire TV, Echo).
- According to Amazon, 76% of Amazon shoppers use the search bar to find an item, and search advertising is a way for brands to stand out among the competition.
Amazon Advertising strategy
With the high level of competition on Amazon, more and more sellers are choosing Amazon Advertising as a tool to improve product visibility and sales conversion rates.
Sometimes sellers must put in more advertising effort, another time products can sell relatively easily with no (excessive) ad spend. Advertising activities should be adjusted accordingly and a well-thought-out ad strategy is a must.
As a result, optimal Amazon Advertising strategy is not about any advertising or the rule “the more, the better”. It’s more about a strategic and flexible plan that will bring sellers the best possible ROI.
One way to maximize ROI from advertising is minimizing cost per click, which may be possible on less competitive markets.
Advertising opportunities on Amazon
Using Amazon Advertising comes with many opportunities. For starters, if you think of the shopper’s context when they see an ad, advertising on Amazon is already an advantage.
If the shopper is demographically targeted with ads whilst reading, let’s say, the Economist, they’re not necessarily in the “shopper mindset” so they may be less open to the ad. A better context would be when shoppers are visiting ecommerce sites, such as eBay or Amazon.
Furthermore, it’s worth noting that since September 2018, Amazon DSP (Demand Side Platform) has allowed sellers to programmatically buy display and video ads at scale and target audiences on Amazon.com, Fire TV Sticks, IMDb.com, Kindles, Freedive, apps, third-party sites, apps and platforms.
Ecommerce opportunities of using ads on Amazon:
- The quality, brand-safe environment that advertisers want
- Reducing the sales cycle
- Improving sales history & product visibility
- Improving brand awareness
- Gaining valuable insights on changing consumer habits to optimize campaigns to reach a more targeted audience
- Learning the best ways to acquire customers at a given time.
With advertising, sellers can use tons of shopping journey data about who their shoppers are and how they shop, e.g. the actions shoppers took after seeing ads. Such data is key for designing successful ad campaigns and targeting at scale.
Marketplaces such as Amazon are leveraging shopper data to make digital experiences more targeted, personalized and intuitive.
Data-driven decisions tend to bring optimal results. For example, tracking spend per click and how many sales result from clicks helps sellers understand what brings sales results and how to optimize Amazon Ads for (more) sales.
For example, if a Sponsored Products ad is sending traffic to the product page but there are hardly any conversions, this means the product page should be improved, perhaps with better content, such as product description, images or additional product specs.
Advertising challenges on Amazon & how to overcome them
Amazon is one of the biggest marketplaces, but also a competitive one. Many brands name general competition with other brands as one of their main challenges. Additionally, the general ad load on the platform has increased and some search formats are saturated.
Thus, paid marketing campaigns can reach a plateau in a given market over time. Acquisition costs can significantly go up without adequate return on investment. This means little room for growth.
Another challenge has to do with Amazon being a fast-growing market where the rules of the game are changing fast. For example, the platform regularly adds capabilities and changes to how some products work. As a result, it can be challenging to be in the loop at all times.
To overcome any potential challenges, the starting point is to create an advertising plan in a conscious and data-driven way. Advertising your product to everyone & everywhere will be a waste of your time and money.
Instead, you must understand your goals, your target audience and what you want to achieve with your strategy. Ad investment involves serious and strategic allocation of funds to achieve the best ROI.
Your Amazon advertising plan in a nutshell
- Set your goals. For example, do you want to drive more sales or improve brand awareness? On Amazon you can align your targets with your goals, e.g. your Advertising Cost of Sales (ACoS) can be your metric of success if you’re set on driving more sales. Impressions, in turn, can be your metric of success if you want to boost brand awareness.
- Select the right products to advertise. Your most popular products along with competitive prices have the biggest potential for sales conversions.
- Create clear, concise and persuasive product pages. Include accurate and descriptive titles, useful and relevant product information and high-quality images.
- Plan, act and test what works & what doesn’t.
Testing & optimization are an integral part of your Amazon advertising mix. Even if your current campaign is working well today, changes and updates are constantly being made on Amazon. Different trends are gaining traction all the time. Thus, change is the only constant.
However, the lack of continuity shouldn’t disrupt your day-to-day operations. Stay consistent, but also stay flexible.
Review your ads regularly, otherwise they may become ineffective over time. Try out different ad types, experiment with keywords, target demographics and content. Then allocate the rest of the budget where the sweet spot lies.
A good opportunity is to test new markets, especially those that have lower competition and can offer low CPCs (cost-per-click) & better return on advertising spend.
International sales opportunities on Amazon
When, over time, paid marketing campaigns reach a plateau in a given market, increasing CPCs further to grow traffic can decrease campaign clicks, sales and overall profitability. In such cases, lower CPCs on less competitive markets can help increase profitability.
On Amazon you can sell on markets with less competition and more sales potential. These are often foreign markets where local online sellers aren’t able to offer specific products or meet the local demand. For example, in Italy many products have to be imported from abroad, e.g. vehicle parts for cars or clothes from foreign brands.
The possibility of satisfying the unmet demand for unique products from overseas is one of the biggest worldwide opportunities for ecommerce retailers. This is how conversion rates can go up and CPC (cost-per-click) can go down due to a lower level of competition.
On international markets, sellers can achieve additional visibility to international buyers and benefit from the low CPCs on these markets. This can be a huge opportunity for Amazon sellers who want to stand out from their competitors.
Finally, Webinterpret’s ecommerce solution helps Amazon sellers maximize their sales on different international markets. With access to comprehensive data and vast ecommerce knowledge, we can help merchants tap into their actual sales potential to achieve the best possible ROI.
Download the complete Amazon Advertising Guide & stay ahead of the ever fiercer competition!