Amazon’s Adventures in Advertising
This is part of an ongoing series of conversations with an eCommerce amateur (who shall remain nameless) and two of DFO’s most knowledgeable (and patient) pros.
Today, Alex Brown (A) and David Stellato (D) give us the details on Amazon’s foray into the advertising space, what it means for advertisers, media buyers and other platforms, and why the devil’s in the data.
Q: Amazon recently unveiled that it’s building out a robust advertising business. Why should the eCommerce world care?
A: The “duh!” answer is that they’re the 600 lb. gorilla in the eCommerce space and, to a large extent, this was inevitable for them. Media buying efforts in the eCommerce industry have historically been focused on Google, Facebook and other large platforms. DFO falls into this bucket; we’ve only very recently begun to sell products with Amazon. They require brands and companies to have product with them, and they take a relatively substantial margin, which is where a lot of the hesitation came from.
It’s different from a resource standpoint. They have more information on customer buying patterns than any other company in the world. The industry needs to care because Amazon is going to invest in the service, and as it continues to develop and expand, it will be an essential tool for advertisers to target and convert consumers.
D: There are brands that, when you look at a specific vertical, are ubiquitous. When people are looking for info, they use Google. When they’re looking to buy a new home, they use Trulia or Zillow. For products, they use Amazon. They’re the world’s most important eCommerce company not only because they have products, but because they’ve ingrained behavioral sentiment and product reviews into the purchasing process. This layering makes their advertising platform much smarter and, ultimately, much more valuable.
Q: Since Amazon has structured their platform around what people have already purchased, do they have a leg-up on Google and Facebook already?
A: The short answer is yes, because it makes targeting that much easier. Facebook is starting to do this by sending post-purchase surveys to consumers in order to verify they received what they ordered, if they were satisfied, to rate the experience, gauge manipulation, etc. Amazon already knows all of this, though. It’s what Dave was alluding to earlier – this data is baked into the purchasing experience.
Look at it this way: I buy multiple items on Amazon every week, and often it’s a recurring shipment. This is extremely actionable for marketers using the platform because they know what I buy, and how often; they can micro-target complementary products to consumers like me very efficiently.
D: Yes, because in the end, data is the most powerful tool we have. It allows them “suggest” something to you based on what you’ve already purchased. With Netflix, if you regularly watch sports documentaries, is the platform going to recommend stand-up comedy specials? Of course not. It’s going to push you the kind of content it already knows you’re interested in. The data is too powerful not to.
Q: Speaking of data, it feels like we’re giving Amazon even more of it. Is that a good thing?
A: The question isn’t, “Is this good or bad?” Rather, the question should be, “What are expectations of consumers?” The bottom line is that they want customization. When I see an advertisement for something that’s completely unrelated to me, I think, c’mon, folks. If you’re listening, you’re not really listening. I have a hot take, and it’s this: Consumers who demand customized content and products can’t be the same ones who complain about big platforms such as Facebook and Google “listening in” and using their data. It’s as irrational as someone who, after a week of fatty meals and inactivity, complains that they haven’t lost weight.
D: That’s a great point. I see it as the meeting place between personalization and instant gratification. People are busier than ever before; they want to find stuff they like, click a button and, within hours, have it delivered to their front door. This doesn’t happen without data. For those ingrained in the eCommerce space, it’s exciting to think about how Amazon is going to use this to push the envelope further.
Q: What do you say to those advertisers who aren’t on Amazon?
A: Even if you’re doing great business buying media on Facebook or Google, many consumers who end up in your online store will check the product’s availability on Amazon. It’s a natural “next step,” and those who aren’t using Amazon to sell are missing out on a huge percentage of sales.
D: They need to understand that it’s not only about sales, but also about validation. Ordinarily, you want traffic directly to your online store to take advantage of higher margins. However, the benefits of listing on Amazon are two-fold: it serves as an additional sales channel (even if the products are listed at a higher price point) and serves as a “stamp of approval” that advertisers very much need.
Q: That begs the question . . . if a customer knows an advertiser’s product is on amazon, what is the chance they shop directly with the advertiser? Does the price even matter?
D: This is going to vary greatly depending on who the shopper is, what the urgency is, and several other factors. Does the shopper want the best price, or do they want the item as quickly as possible? If I’m more price conscious, I may comparison shop between Amazon and another online retail storefront. But for those who are too busy to pick up the dry cleaning, the speed at which Amazon can fulfill orders will likely be too much to resist.
A: This directly correlates to why marketing strategy is so important. At DFO, we’re good at direct response, performance marketing – regardless of platform. The goal is to, after clicking an advertisement, provide consumers with all the info needed and couple it with a sense of urgency. If you’re doing it right, there’s no need to comparison shop.
Q: Are there any drawbacks for advertisers who want to use the platform to scale?
A: Sort-of. If you want to advertise on the platform, you need to have product with Amazon. It’s not possible to run an advertisement on their platform and link it to an outside storefront. This is a big barrier of entry for a lot of smaller eCommerce companies who can’t afford to front-load a ton of products to Amazon.
I alluded earlier that we’ve been doing a small amount of media buying on the platform for some of our products, and the return on investment has been substantial. Most of the interest, however, comes from Facebook; Amazon, even though it converts at a high rate, acts as a smaller, secondary net, capturing sales that have fallen off from Facebook.
D: It can be tricky, and potentially devastating, for those selling without patents or trademarks. People may try to pirate your product and emulate your marketing in order to steal brand awareness and sales, and if you don’t have a patent or trademark, there won’t be much you can do about it. That’s why it’s critical to ensure you’ve got yourself covered in that regard.
Q: What do you think the response will be from Facebook and Google?
A: Facebook and Google are established. They’ve controlled most of the digital media spend for a long time. They know digital marketers are always be looking for new, emerging platforms where cheaper rates and more flexibility can be found. They have the ability – and capital – to innovate, and as Amazon continues to encroach on their territory and catch run-off ad sales, you can bet they’ll do just that.
D: Like Alex said, competition pushes efficiency and innovation. You’ll see Facebook and Google very quickly go this route, because Amazon everything to gain, nothing to lose, and money to spend. For Amazon, it all comes back to data – how it’s harvested, segmented, analyzed and used, especially in other businesses such as their Alexa device, Prime video service, Amazon Pay, and even Amazon Fresh. The next evolution is fast approaching.