Amazon is Gaining More and More Shares in Ad Spending

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Industry Experts are Predicting a Massive Shift in Advertising Budgets Over the Next Few Months.

11th October 2018

According to recent reports published by CNBC and the Wall Street Journal, more and more companies are planning to transfer their advertising budgets from Google to Amazon. Furthermore, insider knowledge has revealed that over 50 percent of global ad spending is set to be allocated to the American retail giant’s advertising network in the future, primarily by major retail brands. ‘This new information is not surprising and confirms our expectations: Profit-driven companies use channels that generate measurably higher revenue,” explains Marcel Pirlich, founder and CEO of Adspert and AI expert in the German Association of Digital Economy’s (Bundesverband Digitale Wirtschaft or BVDW) Programmatic Focus Group.

Shorter Sales Cycle = Reduced Bounce Rate

Pirlich added that, based on his experience, Amazon has taken the right steps in recent years to gradually develop from an e-commerce platform to an advertising platform. With the merging of its three ad businesses, the Amazon Media Group, Amazon Marketing Services, and Amazon Advertising Platform, into a single advertising platform, Amazon Advertising, at the beginning of September, this new priority will also affect the retail side of things. He continued: “Amazon presents the consumer with a very attractive offer. It connects them to the right product at the right time, exactly when they are looking for it while offering a simplistic purchase process. As a rule of thumb, it has long been considered that each additional click in the purchase process causes a 30 percent bounce rate increase. In this regard, Amazon is currently unrivaled, in no small part due to the large number of registered Amazon Prime users, the familiar purchase process, and last but not least, the established comprehensive order fulfilment process, including possible product returns”. Amazon’s popularity as a retail platform is constantly on the rise, and this is backed by hard evidence provided by the market research company Survata: Approximately 49 percent of product searches start on Amazon.

Measurability is Crucial

Amazon’s massive entry into the market has also caused complexity to increase. “We are experiencing an acute demand for action from our customers. Naturally, they also perceive this profound market shift,” said Pirlich. His company, Adspert, supports manufacturers, retailers, and brands alike with an AI advertising solution that can be used on major advertising platforms including  Amazon and Google. The Berlin-based company has set itself the task of achieving a significantly better advertising input using its system, and thus increasing client profits. This is precisely where Marcel Pirlich sees the decisive factor in Amazon’s comparatively new advertising platform: “The decisive factor is measurability: What profit can I generate with the advertising budget that is available to me? Amazon Advertising offers an exceptional opportunity, particularly to manufacturers looking to drive their retail marketing efforts. Through Amazon Advertising, brands are able to be directly present throughout the customer’s decision-making process.”

Algorithms and AI Make a World of Difference

“If you want to approach online advertising in an efficient and successful manner, you cannot avoid programmatic solutions,” says Pirlich. With Adspert, Pirlich continuously analyzes ad performance, market conditions and profitability. Bids on hundreds, even thousands of display advertising keywords or placements are recalculated and independently adjusted based on their strategic potential. In fact, new keywords can be automatically detected, evaluated, and used in the context of the task. Possible target group targeting optimizations (such as times, places, and end devices) are calculated several times a day and carried out independently. It would simply not be possible to do all this manually.

Competition Boosts Online Budgets

Pirlich is not worried about the former top dog, Google. “Google remains a very important player, but the opportunities for advertisers are diversifying and competition among the major platforms can, in this case, only be beneficial.

You certainly don’t have to worry about Google falling on hard times, but other channels which are harder to measure, such as print and TV, now have to face another heavyweight opponent.”

Meanwhile, the industry is discussing the ever-changing digital advertising market. For the BVDW, AI is currently a highly topical subject. The focus group in which Pirlich is actively involved addresses topics such as performance, automation, transparency, regulation, and ethics – currently all related to AI. The first four obvious topics focus on discussing and exploiting product success and customer service opportunities. Particularly important are also topics regarding changes in employee roles and tasks. Pirlich continues: “We are at the forefront of digitalization and face the challenge of  finding suitable employees. The ever-changing environment makes it interesting for existing employees, but it also represents a challenge for employee recruitment as there is no standardized training currently available.”

Merchants Should Take Advantage of the New Opportunities

If you haven’t yet considered the advertising opportunities offered by Amazon, you should definitely do so. In any case, Marcel Pirlich recommends that merchants who sell on Amazon should also take advantage of the advertising opportunities offered by the retail giant, and plan appropriate budgets for it.

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