Amazon Advertising 2021: Sizing the Prize - Episode 218

INTERVIEW WITH ANDREW LIPSMAN

DESCRIPTION

In today’s podcast, we are talking with Andrew Lipsman about the Amazon Advertising 2021 report recently published by Insider Intelligence. We talk about the changes, trends and strategies in advertising on Amazon as well as how customers and brands react to it.

Make sure you tune in to find out!

Andrew Lipsman is a Principal Analyst at Insider Intelligence, focusing on retail and ecommerce. Recent coverage includes grocery ecommerce, retail media networks, D2C brands, social commerce, holiday shopping, and Amazon Prime Day. Previously, Andrew was SVP of Marketing & Insights at comScore. He has been a regular contributor to the Journal of Advertising Research and is frequently quoted by leading news organizations including the New York Times, Wall Street Journal, and Advertising Age.

“It’s a business with tremendous operating leverage.”

— Andrew Lipsman

KEY TAKEAWAYS

Andrew has recently published the Amazon Advertising 2021 report for Insider Intelligence, a research company focusing on digital transformation. It is a combination of two companies, eMarketer and Business Insider Intelligence.
Andrew has been following Amazon for a long time, and for a while Amazon advertising has been under the radar because it’s secondary to other Amazon businesses and tertiary to Facebook and Google. Now it’s become a juggernaut.
Advertising usually grew in tandem with growth in the commerce business, but in the last few quarters there has been a decoupling - commerce decreased, but advertising accelerated due to a big shift in strategy. New incremental money is coming from different budgets and accelerating the growth of Amazon.
Big budget power players are moving into Amazon along with Amazon aggregators and pushing more dollars into advertising, creating more competition.
Being able to leverage what the aggregators know to better optimize spend and find those pockets where you’re getting better ROAS incentivizes upping budgets.
At Bobsled we’re using third-party advertising technology, and it’s the same tool that some aggregators are using. We all have access to the same kind of data on Amazon, so it’s an even playing field.
On the quantitative side, eventually dollars will flow in the same direction as pockets of ROAS, which takes time. Also, everyone will have a different qualitative approach, which will continue to be a differentiator. Aggregators have better qualitative intelligence in addition to being well-versed in running the quantitative playbook.
The report gives a number of predictions, a whole new marketing mechanism that could start playing out:
- Amazon moving ‘up the funnel’ - moving toward the DSP and targeted ads off-site
- Moving toward CTV (connected TV) underpinned with closed loop reporting
- Interactive ads (CTV), take action through Alexa and do “add to cart” from an ad, creating a true direct-response TV ad unit
- Product sampling in a targeted way based on usage patterns

A few years ago Amazon had a sampling program which was paid by brands. The assumption at that time was that it didn’t work, but maybe it was just a test for a relaunch. Other platforms have been working on it - GoPuff has been talking about introducing product sampling into their media network.
We are seeing a shift in the power structure in digital and Amazon is starting to surprise Facebook and Google:
- Amazon keeps gaining market share of digital advertising YoY.
- It is about 1 in 7 ad dollars today, about half the size of Facebook, and it’s eating into Facebook’s share of display advertising.
- In terms of search advertising, it’s starting to eat into Google’s market share.
- The value of the first party data that Amazon has is essential to these ad dollars.

Insider Intelligence has also put out a forecast and is working on a Retail Media Benchmarks report:
- The Forecasts - unveiled in conjunction with the Amazon Advertising report; surpassed 30BN in US in retail media spending in 2021
- Off Site targeted ads (DSP), which is about 10% of total retail media
- The Retail Media Benchmarks report - coming out in early 2022 and looking at the top 10 retail media networks, doing first-party research surveying brands and agencies that are asked to rank the platforms

The tipping point in terms of Amazon ads is the customer experience. There is anecdotal evidence of people turned off by search results pages taken up by ads. In the Report the risk of this is called out as the first notable example of something that is compromising the customer experience for the sake of amazon’s business.
Amazon’s private label brand products have the effect of making other sellers compete with them and creating a better customer experience;
Andrew has recently changed his mind about the Metaverse. He is most excited about retail media because of the increased demand and new interesting angles to explore.
Insider Intelligence launched a new podcast called Reimagining Retail, and the first episode is now available.