- Orders on Amazon generated by ads increased 54% in 2018, jumping from 16.3% in 2017 to 25.1% in 2018, with categories like Home and Kitchen demonstrating a higher "ad dependency" than others, according to a new study from Quartile.
- The study revealed that brands looking for top positions on Amazon increasingly must "pay to play" to stand out, or risk falling behind competitors.
- Quartile, which manages sales for more than 1,100 brands in 35 categories in 11 countries on Amazon, conducted the five-day study over the 2018 Thanksgiving weekend. More than 1 million orders generated by 108 brands were analyzed to identify trends in the growth of sponsored placements and product views resulting from the placement.
The findings are the latest indication of the growing importance of sponsored placements on Amazon as the platform plays a larger role in how consumers search for and discover products. As more brands invest in sponsored placements on Amazon, the strategy appears to be paying off, with Amazon's sponsored products converting at 3.5 times the rate of Google Shopping Ads, according to a Merkle Digital Marketing report cited by Quartile.
Marketers are attracted to Amazon because of its wealth of data on consumer shopping habits and ability to provide a more seamless shopping experience. As a result, some marketers are shifting up to 50% to 60% of their search budgets, usually allocated to Google, toward Amazon.
However, as the volume of sponsored placements grows, it could reach a point of diminishing returns, where it becomes harder to stand out. Amazon's product and search result pages seem to be increasingly saturated with sponsored ads, according to an "unscientific test" by Recode. In May, about 8% of views on Amazon product pages came from product links, more than double from the previous year, per Jumpshot data included in the analysis. The increase is likely due to there being more sponsored ads and the ads' more prominent placements.
The Quartile analysis comes after Amazon reported that the 2018 Cyber Monday and Black Friday were the biggest shopping days in its history, with shoppers ordering more than 180 million items over Thanksgiving weekend, according to a CNBC report. This holiday season, brands planning to advertise on Amazon expect to devote 21% of their overall budgets to the channel, with 82% planning Christmas-specific campaigns and 67% focusing on Black Friday, per ClickZ and Kenshoo research. Fifty-six percent of retail or e-commerce brands will maintain or increase their Amazon ad budgets this year.
Amazon is projected to generate $4.61 billion in U.S. ad revenue in 2018, higher than the $2.89 billion previously forecast, according to eMarketer. The new forecasts show that Amazon has a 4.15% share of the U.S. digital ad marketing, and the company now ranks No. 3 among digital ad platforms behind Facebook and Google, which control a combined 57.7%. Amazon is also expected to grab $1.61 billion in net mobile ad revenue in 2018, a 242% increase over 2017.