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The mysteries of advertising on Amazon, revealed

Though Amazon's range of advertising products is increasingly sophisticated, few media agencies have developed the expertise needed for these new targeting capabilities and ad inventories. We met with fifty-five’s Global Director Media, Hugo Loriot, who lifts the veil to reveal the mysteries behind advertising on Amazon.

What are the main characteristics of advertising with Amazon?

Through Amazon Media Group (AMG), its in-house team that handles managed services, Amazon offers two main options for advertising. The first is available through Amazon Marketing Services (AMS) and concerns “native” vendors, aiming to promote Amazon-distributed products directly on Amazon. This programme, which is self-service and highly performance-oriented, allows advertisers to target pages or keywords by bidding on products from its own catalogue. Mainly composed of native formats, today this programme composes 82% of Amazon's advertising revenue, according to Emarketer. The second option is more widely available to advertisers (vendors or not), and allows them to advertise their own sites and their Amazon page alike via the Amazon Advertising Platform (AAP) DSPDSPA DSP (Demand Side Platform) is a platform that allows advertisers and agencies to automatically manage and optimise their media-buy on one or several ad exchanges through a single platform. It is mainly used to buy display advertising space through RTB (Real Time Bidding).Learn more. Unlike the format of sponsored product sold on Amazon Marketing Services using CPCCPCCost Per Click (CPC) is an online advertising pricing model whereby an advertiser pays a publisher based on the number of clicks generated towards his website by the advertising campaign. SEA campaigns are based on this pricing model, through the use of paid links appearing in search results.Learn more, the idea here is to promote one's brand using display ads sold on a CPMCPMCost Per Mille (CPM), or Cost Per Thousand (in Latin, "mille" means “thousand”), is an online advertising pricing model that refers to the cost an advertiser has to pay for one thousand impressions of an ad. Unlike other pricing models, it is suitable for mass strategies. Some players of the advertising ecosystem buy CPM ad space which they then resell to advertisers on a CPC basis (Criteo, for instance).Learn more basis, on Amazon and beyond, while capitalising on the customer knowledge of the e-commerce giant. For example, it is possible to exclude one's CRMCRMCRM (Customer Relationship Management) refers to the methods, services and tools implemented by a brand to maintain and improve the quality of its relationship with its customers, with the aim of winning their loyalty.Learn more base while comparing it to Amazon’s customer base (similar to AdWordsAdWordsAdWords is Google's SEA platform. It is connected to the search engine and its extensions (advertising partners and the Google Display Network). It allows brands to buy sponsored links that are displayed among search results, or on dedicated advertising spaces available across Google's partner network.Learn more’ Customer Match or Facebook’s Custom Audiences) or to target certain users depending on their product affinity or their delivery address.

What products and services work best for advertising on Amazon?

The range of sponsored products, which are charged on a CPC (cost per click) basis and target users that are actively making purchases, definitely generates a higher short-term return on investmentreturn on investmentThe Return On Investment (ROI) is a performance indicator measuring the efficiency and profitability of a project. It compares the cost of the project to its commercial benefits, generally using the turnover generated by the project in question.Learn more than display advertisingdisplay advertisingWhen applied to digital marketing, display refers to the channel whereby ads are distributed on websites in a graphic format (banner, video, skin...). It should be distinguished from the other main digital marketing channel, namely sponsored links.Learn more — but these products have limitations. Advertisers are slow to adopt these products more widely as they are wary of reduced eligibility and captive Amazon traffic (resulting in zero first-party datafirst-party dataFirst-party data are data that are collected and owned by a company. Each company thus manages its own first-party data, which it uses to improve customer knowledge and customer experience.
In the field of digital marketing, this type of data is mainly gathered by advertisers when users visit their website, thanks to cookies, web analytics tools, or even subscription forms. It can be behavioural (interests, records, purchase intent...) or socio-demographic (age, socio-professional group...).
Learn more
). On the other hand, the display offer — and, in particular, its programmaticprogrammaticProgrammatic advertising refers to the automated buying and selling of ad space. Most of the time, it takes place in real time through platforms such as ad exchanges, DSPs and SSPs.Learn more component beyond Amazon inventory, available via the AAP DSP — provides consumer intelligence data to advertisers by cross-checking advertisers’ audiences with Amazon's. The campaign can also redirect to a brand’s site, thus improving this brand’s data assets.

What would you recommend for brands that want to buy ad space on Amazon?

First of all, most brands should consider their e-commerce strategy more broadly when it comes to Amazon, including managing their promotional offers and their content. Advertising campaigns, established once this global strategy is set, can vary both in openness and in levels of interest in sending traffic back to advertisers’ own sites. It is essential to arbitrate between detailed user knowledge (undeniably better on the advertiser’s site) and e-commerce performance (likely better on Amazon). Once the outline of the advertising strategy has been set, roles and responsibilities must be defined for Amazon, the agency, and the brand. For example, most CPC-based sponsored products are bought directly by brands, regardless of their paid search strategy, despite the clear synergy between the two. As for programmatic offerings, the media or creative agency must be involved in the planning and segment prioritisation phases. Advertisers must ensure that campaign optimisation is moving towards a self-service DSP model, where the learning curve is completely autonomous. Where Amazon advertising is concerned, there is a real porosity between business knowledge and search marketing expertise.

What sets Amazon search apart? 

It is interesting to compare it to AdWords. The range of Amazon sponsored products, as was the case for Google Shopping’s campaigns, promotes the products of a catalogue and is based on a CPC bidding model. These ads are displayed in response to requests on a search interface or on contextualised pages. However, the big difference is the finality of the campaigns, and the resulting capabilities for optimisation, which are impressive. Whereas Google allows you to redirect traffic to your e-commerce site, and to create sophisticated bidding strategies based on ROI, complex retargetingretargetingRetargeting is an advertising process that aims at targeting Internet users who have already visited a brand’s website - or who have had a recorded touchpoint with the brand -, in order to encourage them to reengage with this brand.Learn more rules, or share of voiceshare of voiceShare Of Voice (SOV) is the ratio of a given brand’s advertising investments to the total amount of investments for all advertisers in the same industry or for a specific product type. Learn more compared to given competitors, Amazon sponsored products are today a simple sales promotion model, without an advanced optimisation algorithmalgorithmAn algorithm is a mathematical process designed to solve a problem or to obtain a result, using a finite number of operations. It can be translated into a computer program thanks to a programming language.Learn more and with undetailed reporting. This is one of the reasons why agencies specialised in search marketing have not yet fully explored Amazon’s CPC-based advertising. Until it is compatible with a decision-making tool such as DoubleClick Search or Marin Software, agencies’ time/added value/budget equation does not work in Amazon’s favour.

Google had the quality score… What is the competitive advantage to be gained from Amazon?

Amazon, like Google, uses the second-price-auction mechanism, which ensures that advertisers pay only 1 cent more than the person just behind them in the bidding. Like Google, Amazon uses an algorithm which predicts the click rate of each advertisement to counterbalance bids and avoid an influx of irrelevant advertisers who are ready to pay up for their clicks. However, Amazon’s real added value lies in how few steps exist between search and purchase. When a user clicks on an ad through a search engine, he or she is redirected to a new interface, not necessarily optimised or personalised. On Amazon, the advertiser pays for the right to appear in a single purchase funnel, perfected over more than 20 years.

What are some must-know best practices for advertisers?

Everything that is true for Google Shopping campaigns is even truer for Amazon sponsored product campaigns. For campaigns to perform well, product flow knowledge and optimisation are essential, as this means that the best-value option in an advertiser’s catalogue will appear when a user searches “kitchen mixer”. As for the programmatic offer, it is important to spend a lot of time doing prep work, such as identifying the segments that best match with your brand’s DNA, by cross-checking your CRM database with Amazon’s client database, or by finding affinity indexes for each audience after setting up an Amazon tag on your website. A baby formula brand, for example, might target pregnant women by focusing on Amazon navigation behaviour linked to books about new-borns.

What added value can an agency bring to advertising on Amazon?

An agency can and should bring its experience from other advertising levers. And of course, expertise in search marketing is a huge plus when it comes to optimising sponsored product campaigns. Comparing audience segment behaviours on Amazon vs. DoubleClick Bid Manager (DBMDBMDoubleClick Bid Manager (DBM) is Google's DSP.Learn more), Facebook, or Oath is also key to mastering Amazon’s programmatic offerings. However, advertising on Amazon is only one part of an even hotter topic for brands: their e-commerce strategy on Amazon. Today, the problem lies in brands’ frustration with how little consumer information Amazon agrees to share. Brands need partners in order to solve this problem. The direction that Amazon will take is unclear as of today, but if we look at China’s e-commerce giant Alibaba, which launched a granular DMPDMPDMPs (Data Management Platforms) are platforms that centralise and aggregate all data related to a brand's campaigns and customers. They can hold all kinds of data - online, offline, media, CRM, first-party, third-party... A DMP allows for the segmentation of audiences and the redistribution of data to other advertising platforms, to which it is connected. It aims at optimising client experience and advertising efficiency. Also note that DMPs generally exclude any media activation data that would make it possible to identify a specific individual (PII).Learn more within its walled garden, based on its own cloud computing programme, we can easily imagine that Amazon might launch its own analytics system, also allowing to measure and target campaigns through Amazon Web Services, the world leader of cloud computing. If this development does happen – and historically, it would make sense – agencies/consultants would need new data/analytics expertise to be seen as strategic partners by brands.

This article was originally published on December 15th 2017 on VIUZ, and translated from the original French by Niamh Cloughley.

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