Once upon a time, Amazon sold books, Google was a search engine, and Facebook was still just a social network. Not anymore. Amazon, Google, and Facebook have dipped their toes in all kinds of industries. They have transformed the way people use the internet, business models, and society in general. As these companies embrace diversification, to some degree, they overlap one another, except ads — the one thing common between all of them. Advertising was the only way Amazon, Google, and Facebook could provide free service and a healthy revenue stream. Today, these platforms are competing with each other by offering marketers a full suite of ad solutions.
However, Amazon it seems is riding the wave of e-commerce advertising for now. The slow but firm domination of the digital ad market has forced Google and Facebook to consider Amazon Advertising as a serious threat.
Let’s dig deep into why Amazon Advertising is becoming an ad titan, what Google and Facebook are doing to eliminate the threat, and what the future holds for digital advertising.
Amazon Advertising Beats the Duopoly
The mainstream media is starting to put Amazon Advertising on the same pedestal as Google Shopping and Facebook Marketplace for the obvious reason: a sizeable number of active online shoppers. But that’s just scratching the surface. What makes Amazon truly stand apart from Google and Facebook is that it acts as a marketplace, advertiser, and ad network — all at the same time.
Amazon Advertising: The marketplace that matters
A smart online advertising strategy involves meeting your customers where they are, for most eCommerce brands that place is Amazon.
Folks searching on Amazon are closer to a purchasing decision, which means an ad click in most likelihood converts into a sale. This is in contrast to Google and Facebook where you have people probably at the start of the buyer’s journey where an ad click seldom amounts to a sale.
Brands are already making moves to tap the lucrative Amazon marketplace:
- Advertisers in the consumer packaged goods space are moving as much as half their search budget from Google to Amazon. [CNBC]
- Retail marketers already spend 14% of their digital ad spend dollars with Amazon and half of them are planning to increase spending. Of that increase, 29% are shifting dollars from Google, and 34% are shifting dollars from Facebook and/or Instagram. [Forbes]
- Shoppers spend 45% more time on Amazon compared with just 35% on other marketplaces. [Channeladvisor]
Amazon Advertising: An advertiser that encourages brand growth
Amazon is investing in resources to give brands more reason to stick. These investments aim to combine programmatic demand-side platform (DSP), search ad tool, customer data, and ad-serving solutions into a full-service ad agency of data and ad buying.
Amazon is looking to expand its ad services with the recent acquisition of the Sizmek ad platform. Apart from the technical side, Amazon is also increasing its manpower to cater to the various needs of brands. As part of scaling its ad business, Amazon opened up two locations of HQ2 in New York. Moreover, initiatives like Amazon Posts offer opportunities for brands to connect with customers with the help of engaging content.
Here’s a short and sweet example of how marketers can use Amazon Posts to sell their brand messaging.
Amazon Advertising: A reliable ad network
Amazon released a new directory of managed service providers to help advertisers, who rely on their agencies, find the right partner. The directory aims to save time by simplifying the search for advertising partners.
The Amazon directory is a callout to Google and Facebook to show the maturity of their advertising business. Unlike other ad platforms, Amazon is actively participating in helping marketers develop a robust and reliable advertising ecosystem; creating more than just a transactional relationship.
More importantly, the directory will weed out the cottage industry of third-party advertising agencies that have not shown the kind of engagement and proficiency that Amazon expects from its partners.
Google and Facebook Fight Back against Amazon Advertising
While Google has been hush-hush about the matter, Facebook openly declared Amazon as a direct competitor in its annual 10K filing with the Securities and Exchange Commission. Both Google and Facebook are devising tactics to hold on to their dominant position.
Google is putting its muscle and hopes behind Google Shopping which allows users to search for products and compare prices among vendors. The move is to discourage online shoppers from using Amazon as the starting point for product search and discovery. Every time a shopper skips Google, the company loses the chance to display an advertisement, which remains its bread and butter business.
|U.S. DIGITAL ADS||2017||2018||2019||2020|
|Amazon market share||2.1%||6.8%||7.8%||10%*|
|Google market share||42.2%||38.2%||31.6%||29.4%|
Google announced that it will stop charging merchants to place products on its Google Shopping search page. This might lead to short-term advertising revenue loss, but in the long run, it’s a fair trade for encouraging merchants to put their products on Google Shopping.
Google aims to give Amazon a run for its money. How?
- Targeting non-Prime members: Google Shopping is positioned as a mediator between merchants and people who don’t subscribe to Amazon Prime.
- Going beyond text searches: Shoppers can search via text, video, and voice. This allows merchants to have a good advertising media spread.
- Leverage data: Google is the only other platform that has the same level of data on its shoppers as Amazon does. Merchants can use this data to show the right products to the right consumers.
Facebook’s market grew by 0.3% compared to Amazon with 2% within a single year. To curb Amazon’s dominance and make a strong foothold in the eCommerce space, the social media giant introduced Facebook Marketplace.
But Facebook is not stopping there. New strategies are being implemented to make Facebook more eCommerce-friendly.
- Facebook Watch vs. Amazon Prime: Facebook Watch competes with Amazon Prime when it comes to wooing eCommerce sellers to advertise on the platform.
- WhatsApp shopping button: WhatsApp Business account holders can discover a brand’s catalog on WhatsApp, helping retailers increase sales.
- Instagram Shopping: A whopping 70% of shopping enthusiasts turn to Instagram for product discovery. Instagram Shopping lets people view your products via photos and videos no matter where they are in the app.
The Future Trends in Digital Advertising Platforms
The simple version: brands start turning more to Amazon and similar eCommerce platforms for increased visibility and sales and greater dependency on quality advertising to stand out. Ads in the future will need to be strategic, well-produced, and properly executed for them to be effective.
The complex version: the digital advertising market is expected to exceed $500 billion in value by 2024 and everyone including retailers, ad platforms, and shoppers want a piece of the action. However, a market of that size brings opportunities (and threats) in ways we can’t fathom.
To make the best of digital advertising in the future, here are three trends to keep in mind.
The influx of more online shoppers
There has been a permanent acceleration in the shift to online commerce from in-store retail due to the COVID-19 pandemic, forcing people to buy the most mundane of things like cleaning supplies, household items, and groceries.
As a result, people who previously had reservations against online shopping are now much more comfortable searching and buying products. It’s no surprise, 52% of respondents said they plan to do more online shopping in the future than they did before the pandemic. Retailers will have a bigger and versatile customer base they can advertise to.
The rise of DSP
Leading ad platforms will push marketers programmatically (in an automated way) to buy ad space across from a wide selection of inventory sources. This includes IMDB (Amazon), YouTube (Google), and Instagram (Facebook).
Ads favored over organic
The endgame strategy for advertisers was to gain high organic placements across Amazon, Google, and Facebook. However, these platforms are consciously underscoring the value of organic search for paid ads.
Paid ads come up first on the search and organic results will be pushed to the middle (eventually bottom) of the page. A controversial trend that might become a standard business practice unless legislation acts upon it. This invariably increases the demand, cost, and value of digital advertising.
Amazon Innovates Customer Experience
Amazon’s customer obsession rather than competitor obsession approach has been the primary factor in the meteoric rise of its ad business. As we speak, Amazon is creating new customer experiences, nudging shoppers to shop more on Amazon, which translates to more advertising opportunities.
The voice-initiated shopping
Alexa and Echo technology will be the catalyst to drive shoppers to purchase more with Amazon. With one-third of the US population using voice assistants like Alexa, Brands can use these voice-based customer touchpoints to advertise. For instance “Alexa, how to make a great steak?” Enter your barbeque grill ad!
Nationwide Amazon Go stores
Currently limited to the Seattle area, we might see a nationwide expansion of Amazon Go stores. It allows shoppers to pick up snacks, groceries, and toiletries, and simply walk out with them. No long queues – quick, wait-free in-store retail experience. Sensors track shoppers’ activities as they browse and pick up items, creating virtual carts. When they walk out of the store, bills are charged to their respective Amazon accounts. This platform provides a trove of data for online and traditional brick and mortar brands in understanding purchasing behavior which helps in creating hyper-personalized ads.
Democratizing online shopping experience
Amazon wants to serve folks with low digital literacy: for whom standard forms don’t work. Native tools are used to help people describe their unique needs in their own words. This makes Amazon a truly inclusive platform, providing marketers an entirely new landscape of online shoppers to connect with.
Some of the native tools are:
- Amazon Lex. Part of the AWS stack that builds conversational interfaces.
- Amazon Polly. Converts text into audio.
- Amazon Transcribe. Transcribe customer service calls, automate subtitling, and generate metadata for media assets to create a fully searchable archive.
The Endgame: Good Advertising
Whether you use Amazon, Google, or Facebook, your ad needs to clearly communicate and stand out — and it has to be at scale. Quality and quantity go together. But here’s the million-dollar question: how do you maintain such an ad cadence?