A new study has found that Amazon’s focus on sponsored placements is transforming the ecommerce platform into a ‘pay to play’ arena where brands must advertise to stand out in a competitive market.
Quartile, which specializes in marketplace advertising on the Amazon platform, conducted its 5-day study over the 2018 Thanksgiving weekend, analyzing 1.04 million orders generated by 108 brands to reveal a clear trend of growth in sponsored placements – along with increased product views resulting from that placement.
The study found that orders generated by ads increased by 54% in 2018, moving from 16.3% in 2017 to 25.1% in 2018, with some categories – such as Home and Kitchen – demonstrating a higher ‘ad dependency’ than others.
Quartile, which manages more than $1 billion in sales for over 1,100 brands in 35 different categories in 11 different countries on Amazon, concluded that brands seeking top positions would need to ‘pay to play’ to gain them – or fall behind competitors willing to fall in line with Amazon’s current strategies.
“Our analysis clearly shows that Amazon is growing into a ‘pay-to-play’ platform. More product views than ever are coming from paid placements – brands which are opting into sponsored placements aren’t just getting into the limelight; they’re also enjoying more sales as a result,” said Daniel Knijnik, CEO of Quartile.
“Amazon is currently in the third spot of the digital ad market and aggressively catching up to Google and Facebook. Its ad sales are expected to grow by $28.4 billion by 2023 according to Cowen & Co. – a growth that dwarves the combined increases in ad revenue for television networks globally. The message is clear: if brands want top spots on Amazon, they’re going to have to pay for it, or get left behind by competitors who will.”
Quartile’s study follows closely after Fortune revealed that Cyber Monday, part of the company’s ‘Turkey 5‘ sales period, had seen historic sales highs for Amazon. 180 million products flew off the virtual shelves, surpassing even Prime Day earlier this year – and founder and CEO Jeff Bezos’ own net worth growing by $6.28 billion on that day.
Amazon’s drive toward sponsored placement has not gone unnoticed by other analysts in the eCommerce sector. A data report from Jumpshot revealed that Amazon had overtaken Google in product searches, with 90% of all views coming from Amazon’s internal search engine rather than other sources. This dominance was matched with a 17% increase in sponsored placement clicks over 2018.
Another report, from Merkle Digital Marketing, showed that Amazon’s sponsored products were converting at three-and-a-half times the rate of Google Shopping Ads. With ad spends growing by 165% in 2017-2018, advertisers were also being rewarded with higher sales per click than with other Amazon search formats.
Even consumers are noticing Amazon’s increasing focus on advertisements as the site’s design has changed to accommodate the many ad types visible on a typical search page on the site. Few will look beyond the first page – placing greater pressure on brands to look to advertising for visibility as organic placements get squeezed down.
“Brands using Amazon need to understand that the platform is slowly, but surely, pushing sponsored placements. For brands who understand this opportunity, there is huge potential,” adds Sylvio Lindenberg, Quartile’s Chief Creative Officer.
“As a result, it is essential for them to look at optimizing their paid media strategies with real data based on what their target market is actually doing. This is one situation where knowledge is power – and can lead to accelerated business growth.”