The company Jeff Bezos founded in a Seattle garage in 1994 has fundamentally changed the way hundreds of millions of people across the world shop. But now Amazon is much more than a retail business– it’s a vertical integrator. And its next conquest is the digital marketing industry.
You might recall from a blog post from earlier this year where Shawn Lowe called Bezos out as one of the top disruptors of 2018, citing his ambitious mission to conquer the retail market. Bezos has been obsessed with vertical integration since Amazon’s inception. So much so that he’s developed a fool-proof formula. It goes like this: Amazon starts by using a company’s services then, over time, builds operational efficiencies in these services until they have a competitive advantage over similar services. Then they begin to offer these services to other corporations and users. This model has been wildly successful, and Bezos has used it over and over to transform Amazon into the behemoth it is today. Now he’s implementing this formula to make a move to advertising and marketing.
Amazon’s Early Days
In the beginning, Amazon wanted to be an asset-light company. During his early days as a book seller, Bezos believed he would simply pass orders from customers to the publishers who would then deliver the product. He soon realized that order fulfillment and customer service was weak and, as a result, he decided to create his own warehouses. He invested a lot of time and energy to make Amazon’s warehouses the most efficient ones and today, they’re largely run using technology like robotics process automation. They offered the lowest cost amongst their competitors and once Bezos was sure he could take on his competition, he started offering these services to other companies. The rest is history. Amazon’s warehousing, picking, and packing services are now widely used by corporations. As of June 2018, Amazon operated 741 global fulfillment and distribution centres.
Amazon used this formula to integrate into a variety of verticals including cloud services, delivery services, banking, groceries, TV, robotics, and consumer electronics. Amazon has a restaurant delivery service, a music streaming service, and an Etsy clone called Amazon Handmade. They’ve even morphed into a search engine. In 2012, Amazon surpassed Google as the top destination for U.S. online shoppers. Today, they’re not only the country’s ecommerce leader and a top search engine, they’re a critical channel for product and brand discovery.
The Emerging Triopoly
What does this mean for marketers? First, the digital duopoly will soon become a triopoly, with Amazon chomping at Google and Facebook’s heels. Second, this has created substantial product marketing opportunities and brands must quickly discover how to integrate Amazon into their media plan.
Amazon has slowly been giving more and more prominent placement to sponsored products in search results, forcing brands to buy ads to win top billing. According to eMarketer, advertising on websites and mobile devices will account for half of all as spending in the U.S. by 2021, capturing greater share than television, radio, newspapers, and billboards combined. Amazon has the advantage here because they have created a platform no other company can match. Over the past decade or more, Amazon has transitioned from a major advertiser on Google to a real threat to Google’s future (déjà vu, anyone?). And as more people shop on smartphones, they're skipping search engines like Google in favour of Amazon's mobile app. A study by Bloomreach found that, in 2016, 55% of shoppers start their product search on Amazon, up from 44% in 2015.
Amazon’s ad space is so valuable because it’s is the last stop before a customer makes a purchase and the ads such as those that appear in product searches are the most desirable. “Similar to the candy and magazine racks, which are the most valuable space in the store, Amazon is the most valuable space on the web because you are at the very bottom of the funnel,” says Scott Galloway, a marketing professor at New York University’s Stern School of Business and author of The Four: The Hidden DNA of Amazon, Apple, Facebook and Google.
If your brand sells products online and isn’t currently an Amazon partner, it’s time to change that. If you’re already selling on Amazon, your digital marketing team needs to ensure they’re maximizing your product promotion.
Let’s look at some of the ways you can do that.
Your Amazon Strategy
Research co-produced by ClickZ Intelligence and the digital marketing agency Catalyst revealed that only 17% of marketers say their companies have a clearly defined strategy for Amazon Marketing Services (AMS). This means that many brands are not using the platform to its full potential.
If you’re able to secure the top 3 listings you will live where the top 64% of all clicks are accounted for. An astonishing 70% of shoppers never even look past page one. Amazon, much like Google, uses a search bar that is keyword driven, leading to an algorithm-based search results page. Ads can be seen throughout each page of the buyer’s journey, with the most significant buyer intent taking place on the first page of search results.
Vendors and sellers have the option to take advantage of several paid advertising services available on Amazon. These are great ways to further enhance product visibility and traffic, allowing advertisers to bid on sponsored placements throughout Amazon. Advertisers have three options to choose from when engaging with potential customers: Headline Search Ads, Sponsored Products, and Product Display Ads. Each has a unique way of promoting and highlighting product and offers a distinct opportunity to engage customers during different stages of their buying journey.
Headline Search Ads are either Automatic (content-driven) or Manual (keyword-driven) targeted ads that show up on the right rail and top/bottom of search engine results page. They are keyword-driven and can appear across the top of the search engine results page. They are considered top-of-the-funnel ads because potential customers who click through these banner-like ads are typically at the beginning of their buyer’s journey, and likely open to browsing. Headline search ads are an effective tool for increasing brand awareness.
Amazon Sponsored Products are considered middle-of-the-funnel ads because they appear in locations where the buyer is likely comparing different options for a purchase. Sponsored Product Ads look identical to search results listings in size and content, save for the “Sponsored” messaging at the top of the listing. Sponsored Products is a pay-per-click advertising solution that enables you to promote the products you sell with keyword-targeted ads that appear in highly visible placements on Amazon.com. These ads are very popular because they’re not only available to vendors, but also to third-party sellers. They’re easy to create and they’re usually approved within an hour.
Amazon Product Display Ads are either product-targeted or interest-based and can live on your (or a competitor’s) product detail pages. They are considered bottom-of-the-funnel because they exist where customers are most likely on the verge of a purchase–on a specific product page, whether it’s yours or a competitor’s page. They’re the last ad your shopper will see before they click the “add to cart” button.
Launching paid advertising within Amazon can be an effective way to drive sales. However, we’re fans of a more holistic approach. If you’re promoting a product with a weak product page you might be selling yourself short. An important aspect of your overall strategy should be to make your product pages shoppable and findable. Taking the time to perform keyword research and to develop a content strategy based on consumer insights will provide your customers with both the product information they are seeking and product attributes they didn’t even know they needed. Holistic integration of paid promotion and organic search strategies at the keyword and PDP level is required to truly drive business results through Amazon.
So far, Amazon has not managed to siphon a massive amount of revenue from Facebook or Google. However, if their past success is indicative of their future, it’s only a matter of time before Amazon becomes a heavy hitter in the digital marketing world.