What forms of advertising are used on Amazon? How big a role does advertising play in Amazon sales and how do we expect it to develop in the future?
The Amazon Ads Report 2023, published by Jungle Scout, helps us understand how advertising on Amazon has evolved and what role it will play for Amazon sellers in the future.
Amazon remains the undisputed favourite of shoppers
Amazon’s advertising revenue continues to grow year on year, keeping the platform firmly at the top of the e-commerce heap. The majority (56%) still start their online shopping by searching for products on Amazon. Even if consumers find a product on social media, they are most likely to buy it, or a similar product, on Amazon.
However, the growth in Amazon advertising is much lower compared to the explosive growth of previous years. Recent years have begun to shape a different online shopping landscape for shoppers. Amazon faces the challenges of inflation, the US recession and increasing competition, while working to expand its advertising options and services to help brands and sellers overcome the same challenges.
By 2023, as many as 63% of Amazon’s brands and sellers will also sell their products on other platforms. Social media channels are also making the transition to e-commerce. Now 41% of SME sellers and 62% of large enterprise brands invest in social media advertising to promote their products.
These emerging trends are changing how brands and retailers of all sizes allocate their advertising budgets. While other channels are becoming part of advertisers’ marketing efforts, Amazon’s unique position and targeting capabilities mean that it will remain one of the most important advertising channels for ecommerce.
Read also: Where do you first look for products when you consider shopping online?
How do Amazon sellers advertise?
A recent Jungle Scout study shows that while Amazon Pay-Per-Click (PPC) advertising is still the most popular form of advertising for all Amazon sellers, there is increasing investment in other advertising channels.
Advertising is a vital part of selling on Amazon, especially in the early stages of a sale.
In 2022, SME sellers reduced their advertising investment on e-commerce platforms by 6%, but increased their investment in social media advertising by 15%. Large brands, on the other hand, increased their investment in both e-commerce platforms (6%) and social media advertising (18%).
Sponsored Products is the most popular Amazon PPC option for SME sellers, while large brands and corporations invest the most in Sponsored Brands advertising. The use of video ads has also steadily increased among Amazon sellers of all sizes.
How much is invested in Amazon advertising?
A closer look at advertising spend on Amazon reveals key trends that help understand how Amazon sellers are using the platform to market their products.
Display ads have continued to grow in popularity since their debut in 2019, but it should be noted that the advertising budget for display ads relative to traditional advertising products remains much smaller. As competition for Amazon PPC placement increases and multi-channel research becomes more and more a part of the consumer shopping journey, Sponsored Display offers advertisers a way to reach audiences when they are not on Amazon.
Advertising investment by product price
An analysis of Amazon’s advertising budget for over 25,000 products from Jungle Scout Cobalt’s online shopping database reveals that the majority (25%) of 2022 advertising dollars were spent on products priced over $50. The next largest shares went to products priced between $21-30 (24%) and $31-40 (22%). These trends may reflect the widespread price increases caused by inflation in 2022, which caused some products to move into higher price ranges.
Product price, margin and money spent on advertising are directly related to the main Amazon advertising metrics. We will go into these metrics in more detail in future blogs.
Amazon-mainonnan tulevaisuus
Amazon continues to invest in its unique advertising technology and to expand its range of advertising options. These advances will help sellers reach customers at different stages of the buying journey and attract more traffic to their listings from outside Amazon. In its report, Jungle Scout Cobalt highlights three key Amazon advertising predictions for 2024:
1. Increasing investment in targeting and attribution
Amazon’s attribution models are even more valuable to brands and sellers when competition is at its peak and budgets may be smaller or spread across more channels. Amazon advertising provides an extra layer of strategic confidence when it comes to targeting and driving conversions. Amazon will continue to invest in strengthening its targeting and attribution models, consolidating its value proposition for Amazon sellers.
2. More advertisers investing in display advertising
According to a Jungle Scout survey conducted in early 2023, 38% of Amazon brands and sellers will use Sponsored Display advertising this year, showing an increase from 2022. Increased use of DSP advertising in 2023 will also be reported by more brands and sellers (11%). Brands and sellers will naturally need to monitor the shift of consumers to new channels to research and discover products. As a result, investment in Sponsored Display and DSP advertising is likely to continue to grow.
3. “Social shopping” continues to grow on Amazon
As the influence of social media grows, more shoppers, especially younger generations, are turning to social media channels instead of traditional or on-platform searches to find products. In response, Amazon has already introduced features such as Amazon Posts, Amazon Live and Amazon Inspire to help brands deliver a social shopping experience on the Amazon platform. Amazon is likely to continue to expand these features and its non-Amazon advertising network, bringing the benefits of social media to shoppers and sellers alike.
Getting started on Amazon is quick and relatively inexpensive, but success requires an understanding of the e-commerce giant’s business logic. Getting to the top of Amazon’s search results requires a careful strategy and continuous optimisation. Our knowledgeable journey leaders will be happy to discuss your business’s potential in the ecommerce jungle with you – feel free to contact us!
