Oops, They did it again
Amazon’s advertising sales jumped 41% to a record $4.8 billion during the busy holidays quarter and an annual record of $14,1 billion (X3 higher than 2017), making it the company’s fastest growing business.
The revenue from the advertising business already generates almost 10% of the GMV!
Here are some takings from the company’s annual report, earning call and other reports that were published last week and might explain the eCommerce media phenomenon.
Sponsored Products rule
Although Amazon is looking to deepen the branding abilities it’s offering, the main driver of it’s ad revenue is still the Sponsored Product Ads.
As mentioned in the Merkle Q4 digital marketing report Spending growth for Amazon Sponsored Products ads accelerated to 63% Y/Y in Q4 2019, up from 35% growth in Q3. Spending on Amazon’s Sponsored Brands ad format grew 56% Y/Y in Q4, up from 20% growth in Q3.
“Top-of-search placements for Sponsored Products were particularly important to advertisers in Q4 2019 as they accounted for 53% of advertiser spend on the format and generated 58% of advertiser sales.”
The Merkle report also shows that the Sponsored Product Ads are doing a very good job compared to Google Product ads (and to the Sponsored Brand Ads):
The digital agency Tinuiti released it’s fourth-quarter 2019 numbers based on its client base, showing that “Q4 marks the largest quarter-to-quarter spend and click growth of 2019. Amazon Sponsored Products ad spend increased 30% Y/Y in Q4, the same rate observed in Q3, as sales attributed to the format grew 21%. CPC growth steadily accelerated throughout 2019 as more advertisers continue to enter the space, and in Q4 grew 12% Y/Y.”
Branding
On Thursday morning there was already an item on Mediapost titled “Amazon Predicted To Report Much Faster Ad Growth”.
“Digital agency Merkle expects Amazon to announce that advertisers spent 63% more on Amazon Sponsored Products during the fourth quarter of 2019 compared with the year ago, as they saw sales produced by the format rise 106%.”
Also the Tinuiti report presented that “sales during the fourth quarter grew at a 43% pace — even faster than previous quarters. The share of Sponsored Brands conversions that were new to the brand rose from 58% in the third quarter to 60% in the fourth.”
In the Q4 earning call Amazon Emphasized it’s Brand Advertising Ambitions.
Here is what Dave Fildes said when asked about the advertising business: “We’re focused on the certainly brands as an advertising customer set and a lot of focus on providing the products and tools that are going to help customers and really inspire them… We can help deepen the brand engagement and the customer loyalty through that type of option.
I think broadly with advertising, so much of this is about having — developing great relationships with these advertisers, because I think they appreciate the fidelity we can provide around shopping outcomes. We’re uniquely positioned to do this given our retail business.”
According to the Tinuiti Amazon Ads Benchmark Report clicks to Sponsored Brands grew 38% Y/Y in Q4 to drive a 27% increase in spend, a meaningful acceleration from the 16% click growth and 19% increase in spend observed in Q3. Sales grew even faster than spend for the quarter, with growth of 43% far outpacing the previous two quarters. CPC declined 8% Y/Y, continuing a trend of deceleration observed throughout 2019 and across the spectrum of Sponsored Brands advertisers. Amazon recently opened up the Beta program for advertisers to use video creative in Sponsored Brands.
Another example of the enriched branding tools is the video ad.
Recently Amazon launched Video in Sponsored Brands ads on desktop (currently you can see it at the bottom of the search result pages).
These video ads should help the brands “Stand out in desktop and mobile shopping results and help customers discover your brand and products as they shop on Amazon. Ads are keyword targeted, cost-per-click, and link customers directly to the product detail page where they can learn more and purchase.”
Last week Colleen Aubrey, VP of performance advertising at Amazon, talked at AdExchanger’s Industry Preview in New York City about Amazon intent to move further up the funnel and the big opportunities it sees in expanding into branding.
“I don’t think we do a good enough job of allowing brands to have a recreational and ongoing conversation with consumers … We need to open up the experience beyond ‘I need this item today.’”
Global warming
Most of the advertising revenue still come from the US market but it looks like things are starting to change and Amazon is seeing more interest in advertising in other territories (France, Germany, UK etc).
As mentioned in the earning call last week: “I think what you’ll see more in 2020 is also an — more effort internationally.. there’s international expansion in some other areas”
Also according to the Tinuiti Amazon Ads Benchmark report “Spend for international campaigns targeted outside of the United States grew 45% for Sponsored Products and 39% for Sponsored Brands, as these campaigns continued to outpace US growth”
Shopping season
“The way we look at it and the way we believe it works at least in our business is that customers will have a holiday budget and they will spend it between generally the middle of November.
It’s creeping up to the early part of November through the holiday season. And we do see obviously spikes in Black Friday and Cyber Monday and we also see relative tick-up in trends as we get closer to the holiday and for the shipping threshold cutoff.”
These are the words of Brian Olsavsky , Amazon CFO in the Q4 earning call.
According to Tinuiti Amazon Ads Benchmark report the holiday shopping days that registered the highest sales per click for Sponsored Products advertisers were Black Friday and Cyber Monday, as both the volume and value of ad traffic soared on these key shopping days.
About Mabaya:
Mabaya’s Sponsored Product Ads platform is a white label solution for marketplaces and online retailers who want to run their own ecommerce media and enable their sellers and brand partners to promote their products within the store. The company has vast experience in the ecommerce media space, serving billions of Sponsored Product Ads for major ecommerce sites and investing more than 5 years in developing and updating the platform.
We can’t help you sell like Amazon but we can surely help you have the best technology solution to do it.
