Amazon has become an icon for the digital retail space. Its ability to provide consumers with a convenient online shopping experience is unparalleled, and increasingly, the e-Commerce giant is making an impact in the digital advertising space.
Amazon Prime Day — the bumper July shopping event — is a great example of Amazon’s power to set the agenda in e-Commerce. Amazon competitors reported this year that Prime Day was actually an opportunity to showcase their own products and offerings by piggybacking on the newly established sale season. Additionally, 84% of retailers consider it the most important time for online back-to-school shopping, showing Amazon’s ability to disrupt the normal retail cycles and extend the back-to-school shopping period significantly. As we enter the next major retail spike – the holiday season – we will likely see a similar pattern unfold.
Amazon has the power to influence the industry and drive trends, and as the company continues to ramp up its digital advertising offerings while competitors like Walmart and Target strive to catch up.
Amazon Pushes Competitors To Step Up Their Game
Amazon is at the helm of the rapid growth of e-Commerce, no matter the time of year. The digital retail giant has set itself apart from the rest with its established and effective advertising strategy that many of its competitors are still trying to emulate. Walmart and Target both revamped their advertising models recently with respective acquisitions of advertising technology companies, and Google was not far behind with its Google Express launch, which reimagined the capabilities of shoppable ads. Even eBay is making moves to chase ad dollars with its recent decision to shut down its Commerce Network and reallocate efforts towards advertising services. Overall, Amazon’s efforts to develop an effective digital advertising model has pushed other retailers to do the same.
Amazon As A Driver For The Evolution Of E-Commerce
Traditionally, Google and Facebook have controlled the majority of the advertising market, but the status quo is changing. Amazon is effectively disrupting the duopoly and quickly becoming the third pillar in digital advertising. Bloomberg recently claimed that Amazon is the only viable challenger to the duopoly, and advertisers seem to agree — as many as one out of three marketers are shifting a portion of their Facebook or Google search budget to Amazon. Industry research shows that 60% of digital advertisers have been increasing their Amazon budget in 2019, as they experiment with Amazon ad formats and get more familiar with the Amazon advertising ecosystem.
As an advertising platform, Amazon acts as a massive search engine that captures an attentive and purchase-ready audience. Consequently, what gives the company an edge at earning ad dollars is the fact that the conversion occurs directly on Amazon’s platform after the user clicks on an ad. To direct-response advertisers, especially those in the retail space, this is extremely attractive, and it’s incredibly unique.
Although Google does not seem to have plans to become a retailer, the tech giant is looking to beef up their advertising offerings to better compete with Amazon, recognizing the demand for an ad format that captures consumers who are ready to buy. Google’s shopping ads, a format that has proved popular among retailers, allow consumers who search for products on the search engine to click directly on a product from within the search result. Through Google’s merger of its Google Shopping and Google Express platforms, the company launched its universal shopping cart to offer consumers one place to make a purchase, despite shopping at various retailers. The move shows the company’s efforts to streamline the purchase journey for the customer and shows a desire to emulate Amazon’s platform, including better access to conversion data.
Retailers Will Get Left Behind Without An Amazon Advertising Strategy
Brands are already noticing the value Amazon’s advertising offerings provide — in Q2 2019, e-Commerce ad spend increased 40%, with Amazon in the lead. However, many marketers still have not hopped on board due to the intricate nature of the platform. Some studies show that both Amazon’s campaign management and reporting tools are not yet optimal for digital advertisers and that may hinder future ad spend. Despite these drawbacks, advertisers need to promote their products on Amazon to capitalize on its innate ability to capture ready-to-purchase customers, or risk being left behind — with the huge influx of shoppers on Amazon’s site, advertisers are remiss to not allocate ad budget to the platform.
According to Mary Meeker’s Internet Trends report, e-Commerce makes up 15% of all retail sales in the U.S. However, Amazon itself represents almost half of the U.S. e-Commerce market, according to eMarketer, making the platform a staggering growth opportunity for any retail company and cements Amazon’s top position in the market.
Amazon’s steady growth as one of the most prominent online retailers, as well as one of the strongest advertising platforms is pushing competitors to look for ways to gain market share and engage with customers on their e-Commerce platforms. In the meantime, Amazon will continue to expand its advertising business, gaining ground on the competition while fueling the rise of e-Commerce as a digital advertising channel and blurring the lines between channels.
Wesley MacLaggan has been working with Marin Software since 2008. He is currently Senior Vice President of Marketing at Marin Software. Previously he led the Product team where he was responsible for driving Marin’s roadmap and working closely with engineering to deliver innovative advertising solutions to the market. He has over a decade’s experience developing and delivering analytical enterprise SaaS applications, including four years with Applied Predictive Technologies working on their platform to help retailers maximize the return on their promotional spending. MacLaggan began his career providing strategic guidance to companies in a range of industries with Mercer Management Consulting. He holds an Economics degree from Dartmouth College.