Amazon is primed to become a major advertising player in 2018
In many ways, 2017 was the year Amazon solidified its standing as the tech titan to beat over the next decade. Platforms like Facebook, Twitter, and Google faced a barrage of bad press as it relates to Russian meddling, fake news, trolls, and inappropriate, advertiser-unfriendly content. Even Apple stumbled into some pretty bad news cycles. But Amazon just couldn’t seem to lose.
A recent report from One Click Retail found that not only did Amazon gobble up 44 percent of all U.S. e-commerce sales in 2017, it also made up 4 percent of all retail sales overall. It’s dominating the voice-activated speaker market, and AWS remains a huge profit engine for the company. And let’s not forget its Whole Foods acquisition, which some analysts believe to be its biggest affront yet on traditional retail.
But there’s one sector that Amazon has only dipped its toes into thus far: advertising. It’s a huge slice of the digital economy (Google and Facebook, which together make up 63 percent of this market, generated more than $100 billion in 2017), and yet Amazon has, thus far, mostly avoided making significant investments in growing its advertising products.
In fact, in December Digiday reported that huge brands who are desperate to advertise with Amazon have, in many cases, been met with a cold shoulder. Media buyers have been “finding it difficult to secure an Amazon rep and then start the process of advertising through Amazon’s suite of ad offerings, including its in-house team Amazon Media Group, self-serve marketing suite Amazon Marketing Services and programmatic solution Amazon Advertising Platform.”
But this blasé attitude toward advertising seems to be changing at Amazon. Its advertising sales department is the fastest-growing at the company and it’s opening a new Manhattan office that will employ up to 2,000 people, most of them in advertising.
And there’s good reason for Amazon to get more serious about ads: it’s well-poised to make significant inroads and challenge the Facebook-Google duopoly that currently dominates the digital market. Here are four areas where Amazon is set up to thrive in digital advertising:
The Amazon website: Part of the reason Google became the ad-behemoth that it is is because a web search represents intent. When someone Google’s “plumbers in Richmond, VA” or “best vacuum cleaners,” they’re a consumer near the end of the purchasing funnel. But Amazon, because it’s a retail platform, is even further down the purchasing funnel. It captures consumers either at the very moment of purchase, or at least at the final stages of research that precedes a purchase. For a brand, especially one that sells its products on Amazon’s store, I couldn’t think of a more appropriate time to make a paid push for your product.
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But the opportunity doesn’t just stop at the Amazon website. The company has data on purchases for millions of consumers, many of whom have been shopping on the platform for more than a decade. This rich treasure trove of data can be leveraged through Amazon’s programmatic ad network, which exists outside of Amazon’s ecosystem.
Alexa: Amazon is currently dominating the voice-activated speaker industry. In fact, the Echo Dot was the best-selling product on all of Amazon over the holidays. While this market still has a lot of room to grow, there’s little doubt that it will play a huge role over the next decade in how we interact with computers, appliances, and the internet. Already, Alexa has become a not-insignificant driver of retail purchases, and where there are purchases, there’s opportunity for advertising.
Amazon has thus far been pretty restrictive in how it allows advertising on the Alexa platform, but CNBC reports that the floodgates are about to open. It’s been in discussions with several large brands about how it can incorporate their products when a user asks Alexa for recommendations:
One experiment in the works is letting companies target users based on past shopping behavior. For example, Alexa may suggest to a shopper who previously bought Clorox’s Pine-Sol to consider buying its disinfecting wipes. Amazon is also looking to tap advertising in Alexa’s skills. Someone asking the Echo for help cleaning up a spill might be nudged to use a specific brand.
There are already some sponsorships on Alexa that aren’t tied to a user’s history. If a shopper asks Alexa to buy toothpaste, one response is, “Okay, I can look for a brand, like Colgate. What would you like?”
Again, these are use cases in which the consumer in expressing intent to purchase, meaning Alexa has the ability to insert an ad at the end of the purchasing funnel.
AWS: Amazon, through its Amazon Web Services, hosts tens of thousands of websites and arguably handles more web traffic than any other cloud company. The gargantuan amount of traffic it sees via platforms like Netflix has resulted in several engineering innovations that it needed to implement in order to handle all that traffic.
Because of AWS, Amazon has already-existing relationships with thousands of online businesses, and it doesn’t take much to imagine how it could integrate its programmatic ad platform into its cloud services, creating a seamless experience. The same goes for web publishers that host on AWS and would be more than willing to opt into an ad-revenue share that would result in Amazon’s programmatic ads on their websites.
Amazon Prime video: So far, we’ve mostly talked about direct response advertising. But what about the kind of rich brand advertising that leads to a company dropping $5 million on a Super Bowl ad?
Well, Amazon has tens of millions of Amazon Prime customers, many of whom take advantage of its video subscription offerings (helped by its $4.5 billion in spent on video content in 2017). Amazon has so far taken the same road as Netflix and eschewed all advertising on its video, but Adage reports that it’s developing a free, ad-supported version of Prime.
Not only would this allow Amazon to gain a foothold into the lucrative brand marketing sector, but its access to user purchasing data via the Amazon store might give it a leg up in serving more targeted ads.
Breaking the Facebook-Google duopoly won’t be easy; many web publishers have given up on trying to increase their advertising revenue and are instead diversifying their monetization sources. But no publishers have the kind of scale and access to user information that Amazon has. And 2018 looks like it’ll be the year that Amazon will begin leveraging its data and platforms so it can put up the first real challenge Facebook and Google have ever seen.
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