There has been a dominance of Google and Facebook in the ad tech ecosystem. Their duopoly has been called in by experts for regulation from advertisers, marketers and corporates. However, another American giant Amazon who wants to grab a portion of the huge share of advertising money, both on the mobile as well as online, has come into the fray.
Though in its nascent stage but the rapidly growing ad business has a huge potential. It is estimated by EMarketer Inc. that by 2021, advertising on websites and other devices will account for half of all ad spending in America. It would be able to capture greater share than television, radio, newspapers and billboards combined. As per the data estimated by a research firm, Amazon’s ad business generated $1.7 billion in revenue last year and Alphabet Inc.’s Google brought in $95 billion from all ads last year, and UBS estimates its display ad network will reach roughly around $38 billion in revenue in the current year. Facebook Inc. also made huge profits and took in $40 billion from ads in 2017.
Though Amazon generates most of its advertising credit by selling product search results, allowing sellers to buy slots for sponsored products. Its advertising power has gradually been gaining strength. In the 4th quarter of 2017, the company’s ad business grew up about 60 percent. In its recent Q1 2018 filing, “other” revenue reported by the company, which “primarily includes sales of advertising services” grew 132 per cent to reach $2 billion.
Advertisers do say that Amazon had spent the past quarter making improvements to its advertising offering and insist that the company has been aggressively building its own search and display advertising programmes even in India. Since Jeff Bezos has made his commitment to India clear, by pledging to invest at least $5 billion in Amazon’s India business it has especially taken keen interest in its markets. Out of $5 billion more than $3 billion has already been funnelled into its main Indian subsidiary,” said an advertising chief executive about the e-tailer’s aspirations.
Developing targeted technology is a giant leap forward for Amazon’s ad business. While Amazon Media Group (AMG) handles big ticket brand integration, Amazon Marketing Services is an auction-based, search type model and offers targeted cost-per-click advertising solutions which help sellers reach out to new customers as well as drive sales on the company’s website. AMG is a premium advertising platform within Amazon’s vendor services, which is accessible via Amazon Marketing Services.
With all this development, Amazon is making it clear that they are looking to directly compete with advertising mammoths like Facebook and Google. Amazon’s overall revenue from advertising has increased 60% year-over-year and it doesn’t show any sign of slowing down.
As per the latest reports, it is learned that the e-commerce giant is testing new ad tech tools that will allow it to track shoppers’ buying pattern and lure them back to the website to make a purchase. The tool allows the merchants to sell on Amazon’s online marketplace purchase spots. It will then follow shoppers around the web to entice them back. The company is in the final stages of inviting selected merchants to test the new ads later this month, according to people with knowledge of the plans.
However, sellers are quite eager to understand the performance of their sponsored products campaign, and also take the help of an interactive performance dashboard that assist them in visualising how their advertising campaign has fared with consumers, and with the use of relevant data, vendors can make changes to optimise their ad campaigns.
This is chiefly helpful for vendors who have products listed on Amazon India and are trying to sell it through other parties and want to manage the ad campaigns themselves.
For now, sellers can buy various types of ads on Amazon, and the company has been giving more-importance to these sponsored product spots in its search results. The new tool allows the sellers to bid on ads that will appear on other apps and websites. It would be giving them a much wider reach. Merchants will only have to pay Amazon when customers click on the ads.
Amazon said it can allow merchants target shoppers who have viewed their products or similar ones, according to an invitation to try the new tool that was viewed by various media outlets. But the invitation does not specify which sites or apps will carry the ads placed through Amazon.
Though this type of web marketing across sites and apps is quite a massive industry, but it also sometimes become a challenge to prove that the spots lead to actual purchases. Criteo, a French company spawned $2.3 billion in revenue last year with its re-targeting technology. It allows companies to track and serve ads to web shoppers who have shown interest previously.
Dynamic retargeting has also proved to be a great success across channels such as Facebook, Google AdWords and Criteo. Buyers who have been retargeted with an ad are 70% more likely to convert to the host’s website. Additionally, 72% of consumers more often abandon their shopping carts without making a purchase. The percentage of those who return, and purchase is a measly 8%. However, Retargeting, draws back 26% of them.
Amazon has been leveraging its ads business to boost revenue, which helps it get a larger chuck of transactions on its site. It charges merchants bonus on each sale via its marketplace. It then bills them for delivery fees, storage and packing for those using its logistics services. With this new tool, Amazon will be charging merchants to help drive traffic to their listings on its own website.
“Some sellers have expressed concern that the service will give them a limited view of where ads appear online, which may directly reduce their ability to increase spending on sites that are performing the best”, said Skubana’s co-founder Chad Rubin, which sells e-commerce management software. He further said that Amazon is introducing the product to bill merchants for ads that Amazon previously used to run on Google search.
“They are going to make this a platform and make money from it instead of doing it for sellers pro bono, it gives sellers more reach, but they have to pay for it instead of giving it to them for free.” Rubin said.