Whereas the US is by far the most important market for Amazon, Europe is now composed of almost 7 countries in Amazonland: the UK (no Brexit on the horizon here), France, Germany, Spain, Italy and recently the Netherlands and shortly Poland are coming up. With regard to advertising, however, only the first 5 are open on Amazon Advertising: the EU5.
As explained in our article on Amazon's growth, The 4 Growth Riders of Amazon, Amazon Ads has grown to represent 5% of Amazon's overall revenue, to represent 12.6% of the size of Google Ads and grew by 41% in Q4'19 compared to the year before. Wow!
Let us look at what Amazon Ads actually is. Firstly, from a data point of view, the figures we are reporting on are the "Other" category of Amazon's earnings reports. The main component of that category is ads, but, technically speaking, there could be other booming services in the category. Secondly, Amazon Ads is composed of various branches. We need to make the distinction between Amazon Sponsored Ads on one hand and Amazon DSP on the other. Whereas both leverage data from the marketplace, the DSP offering is a Demand-Side Platform. It leverages data and serves programmatic banner ads across the internet on a CPM (Cost per Mille) basis, similar to a service such as AppNexus. Amazon Sponsored Ads, on the other hand, is more like Google Ads and essentially serves ads based on CPC (Cost per Click) within Amazon search results pages for users to redirect to a product within Amazon.
But why advertise on Amazon? In the case of the Amazon DSP, which is not the strongest programmatic display buying solution in the market, the most compelling reason is the quality of the data advertisers get access to. Amazon is clearly a data-driven company, and the data it generates on user habits and buying intentions is of high quality and not available elsewhere. Looking at the other ad service, Amazon Sponsored Ads, it all comes back to the algorithm for ranking in search results. Amazon is a search engine for products, and one of the determining factors in the algorithm is the speed at which sales are happening, or "sales velocity".
Advertising on Amazon can be a significant sales accelerator, and by this mechanism affect ranking in search results. The same goes for advertising via other acquisition channels to drive traffic to one's Amazon products. If it generates more sales, it generates better rankings, and can consequently boost sales even more. This is not something search marketers raised on Google and Bing are used to.
The importance of organic for paid
But before we reap the benefits of boosting our organic ranking with paid media, let's look at optimizing organic results so any boosting will be worthwhile. And as with any marketing approach, let us start with the audience, understanding user needs and preferences, as well as the way they are expressed. During the research for the Amazon Marketing Report, we discovered an outstanding approach to understanding one's audience. Often called "review mining", this approach is not exclusively used on Amazon, but perhaps it is more useful there, because of the importance of reviews in the first place. Review mining is about finding the nuggets hidden in user reviews about your products, as well as competing and complementary products. Diving into reviews is almost like being under the consumers' skin. It gives you the users' perspective on your products and those of your competitors; it shows what language and characteristics they associate with those products, and it allows you to understand their preferences. It is indeed a goldmine for marketers.
This first level of analysis will also help you perform one of your biggest tasks in Amazon marketing: your keyword research. Review mining will have given you a good set of ideas, and knowing your product will help you define many more. Now it is time to prioritize and deepen your analysis. Be sure to plug into your SEO and paid search keyword sets as well. Most people will use tools for this, and most Amazon marketing tools can provide keyword suggestions and volume predictions. Use these to prioritize your keywords for each product. Next, optimize your product listings and decide which products you want to focus on: typically, the ones where you have the strongest competitive advantage. If at this stage you also have a decent level of reviews and good ratings on Amazon, you are in a good position to expand via advertising.
Amazon Sponsored Ads
When you are starting out, it makes sense to just concentrate on Amazon Sponsored Ads, which are what we will concentrate on in this article. Sponsored Ads are CPC-based, and are aimed at the user journey towards the conversion stage. You need to get your conversion mechanisms at the bottom of the funnel right before moving up.
Within Sponsored Ads there are three offerings:
- Sponsored products
- Sponsored brands (ex-Headline Search Ads)
- Sponsored display (ex-Product Display Ads) – not to be confused with the CPM-based display offers via the Amazon DSP
Sponsored products (ex-Sponsored Product Ads)
Welcome to Amazon Adwords!
Sponsored product ads are predominantly keyword based, and mainly appear in the search results, the exact same focus as the original Google Adwords (now called Google Ads).
This ad type was clearly what the digital marketers who responded to our survey preferred (85% of respondents).
The ads appear at three levels in the search results pages: top, middle and bottom. There used to be results in the right column, but these have now been abandoned.
The ads also appear on Product detail pages, but this is less frequent than in the search results pages. Ads are based on the product listing, so are very simple to create and have no need for moderation, which means they go live really quickly.
With Sponsored products, you can plug into Amazon's artificial intelligence: automatic targeting. This targeting approach, based on machine learning, runs on thousands of campaigns and predicts the keywords where the Sponsored product is most likely to have the highest click-through rate and the best conversion. Automatic targeting aims at matching the product code (the ASIN) with a keyword. It is possible to configure the targeting with the degree of the matching one desires: close matching, broad matching, replacement, complementary. The approach is pragmatic and tangible and generates rich data sets for reporting.
The alternative approach to Automatic targeting is to run a campaign manually based on keywords you select. The keyword matching again makes you think of Google Ads: Exact match, phrase match, broad match and, of course, the ultimate optimization tool: negative keywords.
It is you who decides, and not the machine. The principles of keyword optimization are well known and documented for search marketing. It is a key area of marketing on Amazon and the "Search Terms report" is one of the main go-to resources in the reporting interface.
Other targeting options
Beyond keyword targeting, it is also possible to target per category and subcategory, per product – a list of ASIN codes – and per brand. It is even possible to refine targeting using criteria such as price ranges, Prime eligibility and rating scores.
Sponsored products will be your starting point for advertising on Amazon. And within Sponsored products, you will begin with keywords. Additionally, marketers will often start using Automatic targeting to benefit from the machine-learning and accumulated data from Amazon. Once the campaigns have run for a reporting cycle, marketers will shift the best-performing keywords from automatic management to manual targeting and let the machine generate more effective keywords.
For most advertisers, Amazon is first and foremost a sales channel. This probably explains why the sales metric is omnipresent and why the preferred ad solution is close to the bottom of the funnel. Sponsored brands are ads aimed at an earlier stage of the user journey. They are positioned a little higher up in the funnel: the consideration phase, although they can still be product focused and aimed at sales. Sponsored brands typically have lower conversion rates and are less popular among digital marketers, although click-through rates remain high. The format is a banner with logo, a message, and a product carousel showing up to three individual products. It is positioned in a very visible position at the top or the bottom of the screen on category and search results pages. It can also appear on product detail pages. Clicking on the banner can take you to a Brand store or a custom-built landing page, and clicking on one of the products takes you directly to the product page. It is four ads in one.
Sponsored brands use keyword, category and brand targeting, but automatic targeting is not possible with this type of ad. More advanced targeting options are becoming available also.
Sponsored display (ex-Display Product Ads)
In our survey, the second most popular targeting option was "Display ads". Whether our respondents only meant the CPC-based Sponsored display solution, or whether they were perhaps using the Amazon DSP for CPM-based display solution, was not known. Clearly, there is a lot of confusion about the terminology and naming of Amazon products because they evolve so quickly.
Marketers like the Sponsored display solution because it is sophisticated and allows them to perform a broad range of targeting options, including audience targeting. The ads themselves appear on product pages, search results pages and in a number of different positions within Amazon. In the US, they can even appear outside Amazon. When clicking on an ad, the user ends up on the product page. One of the stronger applications of this is retargeting audiences that have shown interest in a product but not bought it on Amazon. Intent- and interest-based audiences are also interesting for targeting. Sponsored display, again, is used for targeting users a little earlier in the user journey, except in the case of remarketing.
Advertising in Amazon has two different names: Amazon DSP, which is CPM-based banner advertising inside and outside of Amazon, and Sponsored Ads, which are CPC-based ads almost exclusively appearing inside Amazon and for which there are three types.
Firstly, what we could call Amazon Adwords, the Sponsored ads solution which is primarily keyword-based and in which one can plug into machine-learning based automatic targeting.
Secondly, the Sponsored brands solution, which helps advertisers become more visible along the user journey within Amazon.
And finally, Sponsored display, a more sophisticated ad product allowing for audience targeting and retargeting to drive traffic to product pages. To learn and understand it all, the best place to go is the Amazon Learning Console.
To succeed on Amazon in 2020, it will be difficult to ignore advertising. Firstly, because competition has intensified, and, secondly, because advertising plays into one of the key ranking factors within Amazon, namely, Sales velocity. But before you do that, get the price, the supply chain and your audience understanding in place. Getting going is not so different from what we are used to from the past 20 years of search marketing: keywords, matching, negative, cohabitation with machine-learning and the increasingly important role of audiences.
Check out the webinar with Anders Hjorth:
Marketing on Amazon 2020: big changes, big opportunities
Welcome to Amazon Sponsored Ads!