Amazon is a growing force in digital advertising, gradually muscling in on Google and Facebook in a concerted effort to grow advertising revenue from its increasingly “pay-to-play” platform.

Google, under particular threat as a competing search engine, is already responding with its own ecommerce offerings but Amazon’s footprint, a trove of consumer data and proximity to the point of purchase means it will siphon a significant amount of the long time leader’s ad revenue.

That’s the view of Roger Dunn, head of ecommerce and CX at MediaCom, an international media agency network with local customers including Mars and the Dell. Dunn, like a growing cohort of analysts and industry players, believes Amazon has some significant advantages as an advertising platform.

“Amazon is a growing force in advertising and already joining Google and Facebook to create a tech-led triopoly,” Dunn told Which-50.

“Clients are increasingly under pressure to ensure their marketing budgets are accountable, and while Facebook may know your connections, interests and shares, and Google knows your intent; its Amazon that knows what you actually buy and how often.”

As the largest online retailer in America, Amazon has unparalleled access to transaction data, helping to close gaps on marketing efforts — an enduring challenge for digital marketers.

“As Amazon own the transaction, it is much easier for them to attribute on-site marketing activity directly to sales, and offer full customer journey marketing opportunities. Advancements in attribution are also encouraging more brands to send direct traffic to Amazon,” Dunn said.

‘Pay to play’

While Amazon’s presence in Australia is relatively limited compared to other major markets, and offers less mature advertising products locally, the signs from the US suggest the platform is increasingly becoming “pay to play”.

Amazon has had sponsored product ads since 2012, but began aggressively ramping up the strategy towards the end of 2018. Recode reported just how pervasive sponsored placement have now become, revealing organic search results have been relegated well below the fold.

With over half of all online shoppers beginning their searches on Amazon, those sponsored placements become prime real estate. But because the Amazon algorithm buying sponsored ads is also becoming increasingly necessary for organic growth, according to Dunn.

“Multiple factors drive the Amazon algorithm, but ‘sales velocity’ is a key one and if you boost this with paid placements, it will impact your organic success too,” Dunn said.

Brands are responding by shifting more and more of their digital budgets to Amazon, according to multiple reports, leading to speculation it could one day challenge the established digital duopoly of Google and Facebook, which currently accounts for nearly 60 per cent of all digital advertising budgets. At just 7 per cent, Amazon has a way to go but it is growing faster than both Google and Facebook.

A survey of top US ad buyers by investment firm Cowen revealed both Facebook and Google are expected to lose budget shares to Amazon in the next two years.

“Amazon are yet to roll-out their full suite of advertising solutions in Australia, but already we have seen a huge level of interest from clients across the group,” Dunn said.

“Clients are looking to diversify their spend from the big two, and it will be interesting to see how Amazon activity will impact search strategies and spend… Longer term Amazon and other retail media opportunities will need to be considered as part of an overall channel strategy and will therefore likely garner budgets from across the board, based on the business outcomes looking to be achieved.”

Pumping the brakes in Australia

Amazon, while growing in Australia, lacks the dominance it enjoys in the US, UK and Germany. A slow but steady start here has included several key features like marketplace and Prime but Amazon still lacks the sales volumes that would make advertising crucial for partners, according to Dunn.

Roger Dunn, head of ecommerce and CX at MediaCom. Source: supplied.

“Not everything is sold on Amazon yet, with some key categories like fresh food still missing from the Australian site, meaning a number of categories don’t necessarily have a reason to advertise on Amazon. In addition, eBay remains the number one marketplace in Australia, and vertical search still offers a better experience for specific categories e.g. Gumtree for second hand goods, JB Hi-Fi for electronics, or Etsy for handmade goods.”

But, Dunn says, Amazon still presents a unique retail opportunity because of its media mix, audience reach targeted advertising and transaction data. 

“Although some retailers and commenters have downplayed it, Amazon have injected new energy into the ecommerce landscape down under, and the launch of their advertising solutions will add another major dimension to their business in the short term,” Dunn said.

“We tend to overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Just as in retail, early adopters of their advertising opportunities will reap the first mover learnings and benefits long into the future.”

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