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Brand Management

Amazon’s Increasing Ad Platform Power

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Amazon’s Increasing Ad Platform Power

About two years ago, we wrote about Amazon’s growth as a advertising platform. At that time, more than 70% of online ad revenue was going to Google and Facebook. And while there still is no imminent threat to digital’s big duopoly, a new Forrester report points to some trends that show brands are moving from testing Amazon as a channel to implementing always-on strategies.

Oren Stern, Kenshoo general manager, tells Forrester, “2017 was the year of brands testing the Amazon waters, 2018 was about brands getting serious with using Amazon as an ad channel and 2019 will be the transition to Amazon as an always-on ad channel for many.”

Forrester points to four causes that are driving both growth and interest:

  1. Advertisers who sell products on Amazon are increasing their spend on search. This make obvious sense as brands try to capture intent. But, as Lisa Lacy reports in an Adweek article, “The study cited the director of digital commerce at a pharmaceutical company, who said, ‘We have seen [Amazon] algorithmically place their private label products prevalently, which is very concerning for us. So, we have had to invest more in Amazon ads to offset that risk.’”
  2. Brands that do not sell on Amazon, want access to their data to improve targeting.
  3. CPG Brands are being won-over by Amazon’s data on last-mile conversions. Forrester noted those brands have historically not spent as much in digital advertising because of measurement challenges.
  4. Amazon has been working very closely with media agencies, who hold the key to advertiser budgets. Not only have they been designing special beta programs with these agencies, they’ve also sought feedback in how to improve their ad tech offering. Forrester estimates that WPP, Publicis and Omnicom combined spent over $800 million in advertising with Amazon last year—and performance marketing agencies spent $1.5 billion. (Still a meager sum compared to the $171 billion spent on Facebook and Google.)

While the report goes on to highlight some current obstacles that Amazon is addressing, it remains optimistic. One thing about Amazon: They are quick to kill things internally that do not work. And the level of investment Amazon continues to make in this line of business (people they are recruiting, technology they are building) should indicate how much potential Amazon sees here.

Brand managers have a responsibility to push their agencies to explore options outside of Google and Facebook. Even two years ago, we cautioned that Google and Facebook could face problems that would make other platforms attractive. And that was just before the Cambridge Analytica scandal came to light. And now both companies, while still holding the lion’s share of ad spend, are in the hot seat, facing legislators and regulators as the public has grown more savvy about just how little privacy they actually have.

The big takeaway here is to diversify where you spend your advertising budgets. Both Facebook and Google are still vulnerable. A hefty fine or new regulations could drastically impact what they are able to offer, and working with other platforms is a way to hedge against any negative effects.

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