NEW YORK — Agencies for years have pined for a third player to break up the stringent control of digital advertising wielded by the Google-Facebook duopoly, and with Amazon — whose ad business raked in $10 billion in revenue in 2018 — they're getting their answer. But as with any disruptive ecosystem, Amazon requires new skill sets, and there are complexities particular to the service that present both headaches and opportunities for marketing services professionals to consider, according to Mark Power, founder and CEO of the Amazon specialist agency Podean.
"They're very siloed, and it's going to take some time for them to open up," Power, who's written a book on Amazon for CMOs, said of the platform during a workshop at the 4A's StratFest conference this week. "They've only just in the last two years tried to open up to agencies and build out a partnership framework."
Amazon's appeal to marketers is clear: More so than Google and Facebook, it can close the purchase loop by linking advertising back to its e-commerce platform. That platform is rich in the type of first-party shopper data that the duopoly can't offer, though Facebook and Google are ramping up their e-commerce plays. Amazon's also got a leg up and large market share in emerging spaces from livestreaming video (Twitch) to voice-enabled technology (Alexa, Echo hardware) and connected TV (Fire TV), and is quickly encroaching on legacy digital channels like search, including through the introduction of new advertising formats like video.
The range of products and properties Amazon offers can be overwhelming, but agencies should push their clients to try and move early on the space, per Power. Of the millions of merchants on the platform, he said only about 15% actually advertise through Amazon, though areas like search bidding are getting more competitive and expensive. Even for non-endemic brands — those that don't sell products directly on Amazon — figuring out a strategy could become an imperative in the same way it has for Google and Facebook before it, especially since Amazon's data pools are so deep after decades of e-commerce conquest.
"The non-endemics are now realizing the power of Amazon Advertising due to its data and the targeting capabilities," Power said, pointing to automotive and financial services as two categories that are less present in the market but particularly ripe for tapping into Amazon.
"Amazon is relevant for just about every brand out there today," Power added. "There's some way that they have to partner with it, some way that they have to either understand or compete with it."
Obstacles to consider
Amazon's rapid rise has resulted in some growing pains for agencies to grapple with. Its search interface and demand-side platform for programmatic buying are not up to snuff, according to Power.
"These tools are just being built very scrappily and they're not very advanced at all, but they're making a lot of money," Power said. "They're very hard to work with."
His sentiments are shared by others in the industry: A recent report by Marin Software found 37% of surveyed marketing professionals believe Amazon's reporting and campaign management tools are suboptimal.
Beyond the comparatively poor user interface, Amazon's internal marketing teams could be more aligned, even as they now have thousands of employees. Power said they don't "connect together" and can be tough to navigate, but recent deals could help Amazon close the gap faster. Purchasing some of the key ad-tech assets of Sizmek, for example, was partially an "acqui-hire" move, according to Power.
"Amazon's coming to the point where there's only so much they can do themselves," Power said in response to Marketing Dive's question about the acquisition. "They want to do more self-serve. With [Sizmek] came a few clients, but mainly talent."
Power forecast that Amazon will continue to be acquisitive as it looks to fill out ad-tech expertise. In other ways, Amazon doesn't need to patch everything up in the short-term.
"There's lot of third-party software vendors coming in to try and solve problems, and Amazon's loving it because the more people in there, the more money they're making," Power said.
Devising client strategies
Like vendors, agencies can capitalize on Amazon's ascendancy by leveraging their client networks and historical knowledge around areas like creativity and media. Power said that Amazon has become more liberal in sharing data around metrics like product feedback and brand engagement in another indication that it's opening itself up.
"For Amazon to go from $15 billion to $100 billion [in revenue], which is what they want to do, they are going to need to partner with agencies," he said.
Convincing clients to funnel more dollars toward Amazon is only step one for agencies looking to build a bigger business around the service, however. Power cautioned that agencies should advise clients not to expect Amazon advertising to do all of the heavy lifting in promoting their brands, which could be a tough pitch to make at marketers who are used to running set-it-and-forget-it campaigns on other platforms.
"Clients need to have their strategy right, they need to have their brand advocacy platform right, they need to get the analytics right, the retail pages [right] and have A+ content," Power said.
"If you don't get those foundations right, none of the media's going to work," he added. "That's why you've seen a whole group of Amazon-focused agencies crop up."
Agencies also shouldn't expect to be able to master Amazon advertising quickly. Power said he believes there are between 200 to 300 Amazon-specific marketing terms, and that the glossary is growing.
Cost is another consideration: search, which is where most advertisers are putting their money on Amazon at the moment, will continue to get more expensive, while more complex activations, like experiential campaigns or custom packaging, can cost up to millions of dollars, per Power.
But Amazon's edging closer to offering a completely closed-loop ecosystem might make some of the steep price tags worth it, especially at a time when marketers are feeling greater pressure to prove that their work improves performance.
"If I put a dollar in [to Amazon], I'm going to be able to work out exactly how far that dollar went, which is really what CMOs of organizations are looking for," Power said. "They want to understand what their investment will return. Amazon is really pushing the boundaries of that."