- Jeff Cohen
- On October 26, 2017
- 0 Comments
This week at Kantar Retail’s Amazon Workshop in Seattle, Melissa Burdick, Co-Founder of Day1Digital revealed something that some of us had noticed, namely that Amazon was testing the removal of sidebar advertising on the search results page in some cases. I dug in a bit more and found that this ad space is indeed in testing. So what does this mean for Amazon advertisers, particularly those who use Sponsored Products ads and depend upon that sidebar real estate being in play?
What is Amazon’s advertising strategy?
Always a company looking to expand and diversify, Amazon has multiple well-established profit centers in its business model. These include AWS (Amazon Web Services), the Amazon Marketplace, and Amazon Prime services. But there is a fourth, more-nebulous profit center, one about which rumors have been swirling of late: advertising.
Amazon is a massive digital media company with 6.9 million unique visitors per day (not including any of their additional properties). Numbers shared by Marketplace Ignition VP Tod Harrick at September’s Retail Global Summit showed that Amazon annual advertising revenue for 2016 was $1.6 billion. Harrick projected that if Amazon had monetized its audiences in a manner similar to that used by Facebook, Amazon’s revenue would have been $22 billion. Harrick’s projection demonstrates that Amazon recognizes the opportunities within advertising, but it has (by choice or necessity) moved more slowly in growing this channel. So the question in my mind becomes, “What is the connection between what we’ve noticed empirically about the sidebar advertising being in flux, Burdick’s news, and Amazon’s long-game, bigger-picture advertising strategy?”
Given that I am not likely to sit down and chat it out with Mr. Bezos, any answers to that question are speculation. Having been in this industry long enough to have a good handle on “the Amazon Way,” I feel certain saying that testing is a core fundamental to their strategy and we are likely to see more of it in the future.
Why would Amazon consider removing sidebar advertising real estate?
Many sellers believe that Amazon wants them to advertise and that the company will take their advertising dollars regardless of how those ads perform. Google AdWords also seems to take that approach, but that is because Google is in the business of selling search results and answers rather than products and subscriptions.
That’s not how Amazon PPC works.
Amazon is looking to capitalize on both the sale and the ad-spend, which means matching the bid and keyword with the advertiser and product that will most likely lead to the sale. That’s the double win. Conversely, there is a risk of loss. By that, I mean that if Amazon makes a bad match between the shopper and the advertised product, all parties are left with a click but no conversion. In tangible terms, the shopper has not found the product for which he or she was looking, the seller has paid for a click but has gotten no conversion, and Amazon receives a meager ad fee but no sales commission and it has wasted the chance to put the right ad in front of the right shopper in that case (opportunity cost).
That’s not how Amazon rolls…the customer experience is always first.
For sellers, what would be the consequences of Amazon’s removal of sidebar ads?
Currently, Amazon does not provide any type of detailed ad-placement report. There is no breakdown with regard to where an ad appeared, no “first spot at top of page” or “second spot in sidebar” to give sellers statistics by which they can determine success rates relative to real estate. At Seller Labs, when we analyze this for our clients, we typically see that top-of-page advertisements perform significantly better than ads found in the sidebar. So what are the implications if Amazon does decide to remove sidebar ad real estate? Here are my thoughts:
- Your impression numbers could drop. Plain and simple, there would be fewer ads displayed resulting in fewer impressions.
- Click-through-rates may increase. Your ad would be seen less—fewer impressions but your clicks would not decrease—which mathematically leads to a better CTR.
- Advertising costs could rise. Supply and demand dictates that as a commodity becomes more scarce (ad placement spots), its value increases, thus driving up the price of an acquisition. This means that sellers would need to watch their numbers more carefully and be more flexible and willing to spend more. The reverse could also be true as Amazon is always testing new ad placements.
- Winning ads would become more important and more competitive because there would be fewer spots available (and those fewer “better” spots would lead to more conversions). Thus, Bid+ (a tool Amazon makes available to give sellers wiggle room in automatically upping their bids should the competition heat up) would take on a new importance.
- Headline Search Ads (now known as Sponsored Brands Ads) would become more important. With fewer spots for Sponsored Products ads, HSA/SPB real-estate would come more into play. If you are eligible to use these, consider doing so. This placement has always been a high-performing location and it will become increasingly so if the sidebar changes.
- Amazon might test new ad placements. We are already starting to see ads on the product detail page, the add-to-cart space, and the thank-you page. All of these ads are Sponsored Products ad placements. Product detail pages can handle ads derived from both manual and auto-target campaigns, but the other two placements are auto-target limited.
- Expect even more change to come. The only constant with Amazon is change and that change can come in small tweaks or massive game-changers. Sellers need to keep up with news, announcements, testing, betas, and rollouts, and they need to constantly review their accounts, adjust their strategies, and roll with the changes. The nimble won’t simply survive—they will thrive.
Managing advertising is a combination of art and science, one must be both creative and analytical in order to succeed. If you’d like to learn more about how to do this for your business, check out our free eBook, Mastering Amazon PPC, or sign up for a free 30-day trial of Ignite, the smartest way to manage Sponsored Products ad campaigns.