Unless you have been living under a rock and roll or are one of 10 those who still consider e-commerce is a trend, you know about the explosive growth Amazon . com has seen in the last decade. Yet very few people have fully comprehended Amazon’ s maniacal focus on chasing success in the last few quarters. To boost success, Amazon is steadily shifting the model from a retailer to a market. For the first time in its history, over fifty percent of all sales on Amazon had been driven by more profitable third-party sales, where Amazon takes a healthful cut. Also, to boost its main point here, Amazon aggressively CRAPs out SKUs (CRAP is an endearing Amazon acronym for Cannot Realize Any Income, where Amazon’ s algorithms reduce and kick out unprofitable SKUs from its platform. )
But Amazon’ s advertising department has so far flown under the adnger zone. For the first time in its history, Facebook widely acknowledged Amazon as a direct rival in the advertising world in its final earnings call, and it has good reasons to become scared — very scared.
“ We contend with Apple in messaging, Google plus YouTube in advertising and movie, Tencent in messaging and social networking, and Amazon in advertising. ” – Facebook Yearly 10K filing
This is actually the first time Facebook called out Amazon . com in its earnings, and it demonstrates the particular growing importance of Amazon in electronic advertising dominated by the two behemoths.
Ten years ago, few-people thought Facebook would challenge Search engines and become an advertising behemoth. We are the first person to raise my hand plus say I was utterly wrong once i recommended my company then to lessen advertising investment on Facebook since the ROI wasn’ t there. Manufacturers that latched on to the social media sensation that unfurled since then reaped lots of benefits while it was still less expensive to advertise on Facebook. It’ h no more. We are now at the same point with Amazon. Bid density remains low and the upside is large. But there is one fundamental distinction which many marketers ignore which is critical to note….
AMAZON IS A RETAILER VERY FIRST AND THEN AN ADVERTISER. At the most basic level, Google is really a search engine, Facebook is a social network plus Amazon is an online marketplace. On the search engines and Facebook, people are searching for some thing not always a product though. This variation from Google and Facebook is crucial. When you click on an ad on the search engines or Facebook, attributing the influence of that click on sales is still tough, but you go to Amazon with very clear intention of buying products and when you click a sponsored product ad upon Amazon, you land on the item detail page with a big take a look at box. The attribution is clear since it is a closed system. Another basic difference is the interplay between marketing spend and organic search results upon Amazon. Traditional agencies and big brands do not understand that critical variation, and this is where brands can create an enduring competitive advantage on Amazon. That certain click on an ad can not just impact an immediate paid sale yet can also positively turn and speed up the Amazon flywheel and transform your organic search ranking. So brands that will take a jumpstart against competition within strategically buying paid placements to develop organic search ranking on consumer queries can dominate page one for a long period with no need for increasing ad budget permanently.
Optimization on Amazon . com is largely focused on hitting a focus on advertising cost of sales or ACoS (which is nothing but how much money you may spend to get $1 in paid sales). But this like using marketing as a drug which you can’ big t wean away from. Not every click or even ad on Amazon is the exact same. Rather than a peanut butter approach of the target ACoS, brands need to realize the incrementality of each click and then improve the bids. That means you should be prepared to pay more for a click to transform a net, new customer in to a sale than a click where the customer has already made up his mind to purchase your product. You can capture this transmission based on what keyword consumers are looking for – branded, category or rival.
Taking this one step further, you should be spending less upon search terms where you are already getting the lion’ s share of top search engine results organically and invest them within searches where your organic existence is low. Finally, it is important to make sure that you have profitability of investment in your mind. Why chase a highly expensive search phrase and engage in a bid war along with competitors when you can programmatically identify a number of long tail inexpensive search terms plus own them.
Amazon . com is clear in its priorities: End clients will always take the cake, followed by development and profitability. Their investment within high margin advertising business is really a way to improve the profitability of their store operations. But they do not lose consumer focus even in advertising by making certain products with good conversion, minimal ratings and reviews and relevance get preference. The success of individual manufacturers is not in their top three focal points so brands need to programmatically reduce wasteful ad dollars and reinvest them in high growth for you to drive incremental sales rather than a pride efficiency metric like advertising price of sales.
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