If it feels like Amazon’s site is increasingly stuffed with ads, that’s because it is. And it looks like that’s working — at least for brands that are willing to fork over ad dollars as part of their strategy to sell on Amazon.
Amazon-sponsored product ads have been around since 2012. But lately, as the company has invested in growing its advertising business, they’ve become more aggressive.
See, for example, our search below for “cereal.”
The first three results, which take up the whole screen above the fold — everything visible before you scroll — are sponsored placements that appear as search results: Ads for Kellogg’s Special K, Quaker Life and Cap’n Crunch. (It’s similarly dramatic on mobile, where it takes up the entire first screen.) This is followed by a section featuring Amazon’s own brand, 365 Everyday Value, which was part of its Whole Foods acquisition.
Not until scrolling down halfway on the next browser “page” do organic search results — non-paid, non-Amazon brands — come up: Post’s Honey Bunches of Oats and Kellogg’s Frosted Mini-Wheats and Frosted Flakes.
Sponsored ads allow vendors to bid auction-style to have their products show up when consumers type in a related search term. If you’re Duracell, for example, you can pay to have your product show up above or among search results when someone types in “batteries” — or “Energizer.”
When searching for a specific product — “Kellogg’s Corn Flakes,” for example — ads for Kellogg’s own Frosted Flakes and competitor Nature’s Path Corn Flakes both show up as sponsored results first:
And in an unscientific Recode test, these types of ads showed up for every search term, from the vague to the hyperspecific:
“Nobody is scrolling beyond the first page when they do a search,” Jason Goldberg, SVP of Commerce at SapientRazorfish, a digital marketing agency, told Recode. “If you want to be discoverable, you have to find a way to show up in search results.”
To get that prime visibility, brands are responding with more cash. Spending on sponsored products in Amazon’s search increased 165 percent in the second quarter of 2018 compared with a year earlier, according to data from marketing agency Merkle.
The competition for brands to bid on their own or others’ keywords is fierce, and is leading toward what Goldberg called a “perfectly escalating arms race where all the trends are to spend more money to buy more ads to have better visibility on Amazon.”
Amazon makes money every time consumers click on an ad — and it still gets to sell whatever people end up buying.
Amazon’s advertising approach is increasingly important for brands, with about half of all product searches beginning there rather than with typical search engines like Google.
It’s also increasingly important to Amazon, which generates most of its revenue from its e-commerce business. Advertising is its smallest segment, measured by revenue, but its fastest-growing. (Its “other” segment — which primarily consists of money it generates from selling ad space on its websites — generated $2.2 billion in sales last quarter, up about 130 percent from the same period a year ago.) Amazon is now a big-enough advertising player that it’s expected to eat into Facebook and Google’s dominant market share.
Amazon would not comment on the growth or placement of sponsored ads, but offered this statement: “At Amazon we work hard to continually invent new ways for customers to find the right products to meet their needs. We take the same approach with sponsored products and sponsored brands. We are focused on creating value for customers by helping them discover new brands and products.”
One interesting element: These ads not only help big companies maintain their leads, but can potentially help newer, lesser-known companies become visible — something that isn’t always the case in physical stores with finite shelf space.
“The growth of sponsored product ads on Amazon bodes well for vendors,” Oweise Khazi, associate director of Amazon IQ at Gartner L2, told Recode. “It breaks up the duopoly that’s Facebook and Google and, hypothetically speaking, gives vendors more avenues and bargaining chips.”
And for those willing to bid on sponsored ads, Amazon search advertising seems to be working.
Nearly 8 percent of views on Amazon product pages came from sponsored links in May, more than double what it was a year earlier, according to data from analytics firm Jumpshot, which collects URL data from a panel of 100 million people.
(Jumpshot estimates that the share of all Amazon purchases that come from clicking a sponsored search results is under 7 percent this year, but that’s nothing to scoff at when you consider Amazon’s net product sales were $31.8 billion last quarter.)
The increase likely comes from a combination of more sponsored ads and more prominent placement.
Amazon seems to be following Google’s trajectory of adding more ad sections in search results. Here’s a look at paid placement on Amazon versus other popular search engines and shopping sites in a search for “shoes”:
Of course, there’s a limit to how many ads Amazon can place on its pages before it starts to annoy users or cause prices to fall. But that hasn’t happened yet. The average cost per click on a sponsored Amazon product rose to 84 cents in the second quarter of 2018, up 6 percent year-over-year, according to digital marketing agency CPC Strategy.