Much of the e-commerce industry’s focus over the past few months has been on Amazon and its response to increased consumer demand for online shopping and delivery. In addition to navigating these new obstacles, today’s Amazon sellers are also faced with the challenge of implementing strategic advertising campaigns.
According to a recent report from Feedvisor, 73% of mid-to-large U.S. brands now advertise on Amazon, which marks a 57% increase from just last year. Nearly half (47%) of brands report they’ve experienced a sevenfold return on ad spend (ROAS) through Amazon’s multitiered options, while 59% of brands selling on Amazon said the platform’s ROAS surpasses that of long-standing ad giants Google and Facebook.
These early statistics likely reflect all of Amazon’s advertising options combined. Amazon is broadening its automatic and manual offerings with an array of customizable formats that perform alone or together to target customers at various stages of the online retail experience – from comparison shopping to post-sale. Over the past year alone, Amazon has added multiple new advertising features, including sponsored brand videos and key report scheduling.
As Amazon’s marketplace expands to include more third-party sellers, many with the highly-coveted Prime designation, sellers are clamoring to capitalize on the mega-retailer’s advertising options. Here are a few key points e-commerce sellers should consider in order to optimize their Amazon ad spending.
Don’t put all of your eggs in one basket.
A recent report from Juniper Research predicts that, over the next several years, Amazon’s ad revenue will grow 470%, reaching $40 billion by 2023. While Google’s ad revenue is projected to top $230 billion in the same time frame, it’s expected to suffer a 1% drop due to competition from challengers like Amazon.
Yet, despite Amazon’s growth trend, the future remains uncertain. Many brands plan to hold fast to Google and Facebook ads, while new contenders, such as Walmart’s recently-launched self-serve ad platform, enter the space. In the midst of rapidly advancing technology, today’s cutting-edge digital ads may be deemed archaic in a matter of months. For example, Google’s new AI-powered Discovery ads, aimed to reach consumers when they’re most receptive, might pioneer a new standard in consumer privacy.
A recent report showed that 70% to 90% of the impact of Amazon display ads drives sales outside of Amazon, while 10% to 60% of the impact of search ads drives sales outside of Amazon. According to these statistics, not only should brands that primarily sell on Amazon concentrate on search ads while brick-and-mortar brands focus on display ads; Amazon advertising may incentivize new physical retail locations for brands already generating high offline sales.
This omnichannel “spillover” effect may be more strongly affiliated with Amazon ads than ads on other platforms, because most consumers (66%) begin searching for new products on Amazon, while just 20% use Google. One of the most compelling insights to glean from these statistics is that brands do not necessarily have to sell their products on Amazon to benefit from Amazon ads.
Build your best campaign.
Amazon currently offers multiple types of ads, including product ads, brand ads, display ads and video ads. Choosing the right ad strategy based on your product and profit margin begins by selecting an automatic or manual campaign. If you’re new to Amazon advertising, an automatic campaign (where Amazon automates keywords and ad strategy) may be your best bet. While manual campaigns give you full control of these metrics, they also require you to clearly devise your own campaign structure.
Optimizing Amazon ads can be a process of trial and error. A general rule of thumb is to bid higher on high converting keywords and lower on low converting keywords. Ultimately, however, your Advertising Cost of Sale (ACoS) must be low enough to justify the cost of higher product ranking. Since Amazon is a different platform than Google, the same keywords may perform differently. Do your research using Amazon’s search bar to establish the best platform-specific keywords for you.
The same level of research and experimentation should be invested in determining your highest converting keyword match type (broad match, phrase match, exact match). It’s not always immediately apparent which match type will perform best for you. Creating ad groups that prioritize broad match keywords, as well as ad groups that home in on precise queries – then tracking their individual conversion rates – can help you choose the best strategy.
Ultimately, brands selling through Amazon must factor in Amazon’s storage and fulfillment fees, which, depending on your profit margin, can be relatively expensive. When you decide to pay for advertising on top of these expenses, you should gradually test the waters to see if you can make it work – instead of investing a lot of money upfront, only to find it’s simply not supported by your margins.
As the marketplace fills with more competition every day, it can be tempting to jump the gun. But if you take your time to strategically optimize your Amazon ad campaign, you may find that slow and steady wins the race.
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Author: Durk Price, CommunityVoice