The Secret Behind Amazon’s 500 Million Dollar Advertising Play

by | 27 Jun 2022 | Information, Sales & Marketing

As we all know there has been a boom in D2C startups in the past few years brands like Dr. Vaidyas, Mcaffiene, My Glamm, and many more have scaled from small house brands to brands with large valuations claiming billions in venture capital funding.

But there’s one thing common amongst all of these D2C conglomerates – the fact that they advertise on Google and Meta (formerly known as Facebook) to drive awareness and growth. However, in the recent years there has been a major shift from these platforms to Amazon

Amazon as we know it – is one of the largest ecommerce marketplaces in the world and they have data – A lot of data. Overall Amazon has 300 million active users (to put it into perspective that’s twice the population of Russia!) So how do they plan on using this large base of data?

Well to start off in 2012 Amazon started allowing their listed sellers to run advertisements on their website and app. However these were primarily in the form of banners on their home page. With Digital Advertisement Spends set to grow significantly over the next years ( today it is estimated to be a whopping amount of 455.3 billion US dollar in 2021) Amazon started focusing on allowing their sellers to target prospective customers via various forms of advertising on their platform.

Since the beginning – Google and Facebook have dominated the Digital Spend market share with a cumulative total of owning 35% of all digital spends in 2020. This equals to a total of 160 billion dollars in revenue. They’re closely followed by smaller players like Albaba and Tik Tok who are at about 8% of the entire market share. A chart below shows the current global ad spend and market share holders

Amazon works on the same pay-per-click model as Google with one massive difference their users are already on the app to shop

So let’s dive into Amazons new interest in capturing the Digital Advertising space and see why they are growing at a fast pace in India

Well to start off according to Digital Ad estimates by media firm Dentsu India’s digital ad spend is expected to grow 20% to this means that as per current estimates (and since Amazon has projected to grow its Digital Ad revenue to $500 million) Amazon would control around 20% of India’s Digital Advertising market share. This is primarily due to the fact that in India Amazon is currently the 3rd most visited website after Google and Youtube.

Also, Google and Meta (formerly known as Facebook) purely depend on user behavior on external websites and this creates lack of accuracy in tracking and targeting the right audience. However, since Amazon has its own user base and runs advertisements on it’s own website/ application accuracy to target the right audience increases significantly.

To put this into perspective – Imagine you are a seller and are running advertisements on both Google and Amazon here’s how the general purchase cycle would look like

Therefore sellers now have access to customers with a higher intent to purchase and since Amazon owns the entire purchase funnel it ensures a higher Return on Investment for advertisers.

Post 2020 India saw a massive increase in online purchases from Tier 2 and Tier 3 cities – Amazon being one of the primary platforms used to purchase from.This allows sellers to gain access to an even larger market.

So how does Amazon Advertising work?

Amazon Advertisements work in a pretty similar fashion to Google. Bids are made on keywords that are related, in the same category or are similar to your brand and product and when a user searches for that keyword your product shows in specific places on the application/browser basis the amount that you are willing to bid vs. your competitors.There are multiple permutations and combinations that can help you get a higher return on your investment however you would rather leave that to the experts

Here are the type of Amazon Placements you could bid for –

1. Home Screen Display

Usually one of the most expensive placements in Amazon your product is usually shown on the top banner or other smaller banners on the home page.

2. Sponsored Brand Placement

Generally when you outbid your competitor by bidding higher for specific keywords/ terms Amazon tends to showcase your brand page at the head of the search page. This allows customers to see your brand during the initial search which can over all increase awareness. An image below shows where your brand will be showcased when you get a Sponsored Brand Placement

Quick Tip: Being able to rank or showcase your brand page at the top of the search page for certain keywords can create massive brand awareness which in the long run will increase conversions amongst

3. Sponsored Product Placement

This is the most common placement on Amazon Ads usually present right under the brand placement mentioned above. Here customers can interact and go to your product page

Quick Tip: It is always advisable to run campaigns with competitors keywords here so that you can rank under their brand page showcasing your product and moving the customer to your product page

4. Sponsored Brand Videos

A great way to showcase your brand is via video advertisements. In Amazon your video advertisement is shown after the initial scroll. This can be used as a great mechanism to create brand awareness and some user interaction as brand videos usually attract more interest

5. Sponsored Display Advertisements

When you move to the product page usually there are various products that are seen over, next to and under the main product already displayed this placement can allow you to do the following

  • Cross sell multiple related products that can be sold along with your product
  • This can also be used to showcase your products that are related to that product page. For eg. if you are selling Iphone covers you can run this advertisement to complement the main Iphone page
  • Run ads on your competitors product page so as to create easily comparison on price and other features

Quick Tip: There are tools like Helium 10 that you can use to ascertain which of your competitors and their product pages are getting the most views/ traffic and manually bid for those keywords

So do we feel that in the long run Amazon might take over Google market’s share in Digital Advertising spend – there are a few indicators that do point towards Amazon eating Google & Meta’s market share however, there is one factor that might be it’s ultimate downfall. The fact that Amazon can only run advertisements for products that are listed on their platform and not for any type of business. This coupled with the fact that Amazon also takes a commission off each sale might ultimately lead to D2C brands focusing more on other advertising platforms to increase overall profitability

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