Experts predict that Amazon will become the leader in online advertising.

Web advertising is now on two pillars: Google and Facebook. According to a study by eMarketer, these two companies in 2017 took more than 63% of market revenues. To describe them in the States even came up with a special term - “digital duopoly” (“this is like a monopoly, only you do not violate any laws”). But from July 2017, industry experts began to turn their heads to the side of a third company. And this February, there were suggestions that in a few years it could outrun both Facebook and Google. One of the giants of the marketing industry, WPP plc (with a portfolio of $ 70 billion), called its appearance on the radar "extremely destructive in many ways," and without much hunting set aside $ 200 million for "test" advertising on the site.

It is assumed that neither Google nor Facebook will be able to compete with a competitor if he takes up the matter seriously. The reason is that he has access to a huge amount of information, about which two other web giants do not really know anything ...

Recently, this company has become the third largest in the world, after Apple and Alphabet. In 2017, its shares grew by 56%, and its founder became the richest person in the world . On holidays in November-December, 89% of American purchases on the Internet accounted for her alone. This, of course, is about Amazon.

Experts estimate that in the coming months, Amazon will be the third in the world of online advertising, beating Oath (the parent company of AOL and Yahoo). Twitter and Snapchat, included in the top 6, were left far behind. The firm, as usual, does not disclose its figures, remaining as secret as possible. According to estimates by JP Morgan analyst Doug Enmuts, for 2017 the sale of advertising brought Amazon $ 2.8 billion. Google’s scale doesn’t compare: the Internet search engine earns $ 73 billion from advertising. But it is expected that advertising sales from Amazon will grow by 40% for the year, and it will take away the budgets of Google and Facebook. At the conference in July, announcing the release of the AAP service from the status of open beta, Amazon said that competitors could not oppose anything to it.

Where such confidence? Still, Google has a huge amount of data on the history of our search and our views. And Facebook has the opportunity to give advertisers accurate information about our age, status, relationships, place of residence, social circle ... But it turns out, Amazon data is much more valuable. She knows about the history of purchases of its users, about real sales. Competitors have no such exact (and such extensive) information.

Advertising revenue in 2017. Each cube - $ 500 million

Most of the online shopping in the United States is made on Amazon, and the company does not share its data with anyone. Now she began to recruit advertisers, and promises them that she will become the leader in the field of advertising. Those who have already switched from Google in recent months say that the online store has a significantly higher ROI. And the agency GroupM, which is responsible for advertising Unilever, NBC and other large companies, says that in 2017 its customers spent 10-15 times more on promotion through Amazon than in 2016. Growth is amazing.

At the same time, Facebook and Google users are well aware that there is advertising on their sites. And Amazon's customers often do not even suspect this.

How it works

Thousands of companies, large and small, sell their products through the Amazon Marketplace system. Now, about 40% of the store’s sales are made up of just such firms placing their products with it. For this they pay $ 39.99 per month +% of the price of the goods (if they sell a lot), or $ 0.99 for each item (if they sell less than 40 products per month). Plus - various additional fees for warehousing and delivery. For companies, this is beneficial because of the huge customer base of Amazon and the frantic popularity of the site. More than 95 million unique visitors per month! In addition, Amazon takes care of the packaging and mailing of goods, the company has the largest warehouses and the fastest delivery in the States. Showdown with the return of goods - also on it. Firm-seller feels like back from a big brother. If you have a “tasty” price, and the reviews are positive, everything, the future is guaranteed for you.

In 2016, 12,000 companies were working on the site, earning more than $ 1 billion a year in total. Now all this has grown 5-10 times. But this means that there is more competition. A place on the page search results site - oh, how limited.

A good example is jijamas. Pajamas for women made of cotton, super soft and expensive. The company was founded in 2013, it has its fans, and the reviews are positive, but there are two problems. The first is the price: Amazon does not like to give out things at the top of the page for $ 80, if you can find products for $ 20 from the same category. The second is the name. "Jijama" no one is looking. Except, perhaps, old customers who already know what it is. In order not to lose profits, the head of the company is forced to resort to advertising through Amazon. To pay money so that his jijams would be on par with the pajamas in extradition. And if the ratings of his products are worse, he must pay more and more for his chance to catch the eye of the client.

Amazon Campaign Settings

There is no exit from the owner of a small company. Advertise with Google - meaningless. You will either promote the Amazon website itself, which is simply stupid, or you will try to promote your website, from which there will never be such sales in the USA as from the main online platform of the country. From the user's point of view, why take things from some incomprehensible site, if you are already used to a free two-day delivery straight to your home.

Amazon now accounts for 70% of the sales of jijs (the remaining 30% comes from its own website). In order not to lose the position in the issuance of a key request, the business has to pay Amazon more and more, because the number of competitors on the site who pay for the same places in the issuance increases every year. At the same time, Amazon loves products with a low price, so raising margins for the sake of such advertising is usually not an option: you lose more positions than you acquire. It turns out a vicious circle.

Daniel Knizhnik, founder of the small advertising agency Quartile, working exclusively on Amazon, compares the local platform with Google AdWords. Most ads appear on top of search results for different keywords, and are marked with a Sponsored dash (which, however, few people pay attention to). But, like Google, search results are also given only to those who liked the company's algorithms. You can “like” in many ways: by spending money, getting good reviews and ratings, selling many products, confirming that your product works with “Alexa” ...

The algorithms of Amazon are constantly changing, trying to find something that will interest buyers and will be beneficial to the company. And just like we have many CEO-shniki trying to guess the algorithms of Yandex and Google, so in the US, many sellers, instead of buying advertising, are trying to organically tune out the algorithms of Amazon. According to the Wall Street Journal , there appeared entire price optimization services, “repraisers”. They automatically change the value of your products so that they like the store. The systems there are so complex that WSJ journalists compare them to trading on the stock market. But the profit is also very noticeable. Sometimes the price, increased or decreased by ten cents, can advance your product by two or three places in the search results. And that many thousands of additional orders.

As a result, even "the most profitable store in the world" winds up the price decently, sellers complain. Especially for those products that are advertised in ads. The creator of "jijam" says that 15% of the starting price for him goes to ensure that the product is simply registered on the Amazon Marketplace. Another 5-6% - payment for the warehouse and for delivery. An additional 12% of the site accrues for each item sold through a Sponsored die ad. And in April, Amazon will begin to take an extra 2% for clothes (the company did not explain the reason). As a result, 35% of each advertising "jijama" goes into the pocket of a giant retailer. $ 28 from a successful transition! Google and Facebook only dream about such numbers. And the result - $ 2.8 billion for Amazon for advertising those goods that already bring her income.

Whats in the future

Amazon is constantly introducing or buying new sources of information about the tastes of its potential customers and their behavior. To do this, she bought Whole Foods food chain for $ 13.7 billion last year, created a store without a checkout Amazon Go . And, of course, I developed an intelligent assistant, Alex , devices with which are specifically relatively cheap, so that Amazon can then pay back quietly and for many years by selling its products and services to users. According to the model of the Kindle reader or printers with cartridges.

It is expected that by 2020, one Alex will bring the company at least $ 10 billion - mainly due to advertising. So, when requesting a purchase, it always first checks if the product is on Amazon’s site itself. And if you ask, “Alex, what is the best tablet now?”, The assistant will recommend to take the same Kindle Fire. Potentially, Amazon plans to sell contextual advertising for such requests - when smart devices will become quite common.

Every time the Amazon store bites off another percentage of the delicious $ 5 trillion American “pie”, this is another $ 50 billion of data that Google and Facebook will never get. Competitors receive less information for analysis and for sale. In addition, the main online store only one knows about the real goods that are of interest to users. Diana Gordon, director of electronic advertising agency Shop +, one of WPP subsidiaries, tells the Wall Street Journal:

Amazon doesn't just know where you're going. He knows what you are buying and how you do it. He knows the history of your purchases, the way you choose a product, how you search for it, how much money you are willing to spend. He knows which days you should offer certain products for you to buy them.

Amazon accounted for more than 53% of online sales in the United States in 2017. More importantly for online advertisers - the site has collected the most information about all products. Reviews, video, photos, ratings, details about the characteristics. Therefore, even if customers are not going to buy on Amazon, they often begin their search for suitable items in this store. The company said that in 2017, 60% of online shoppers in the US were looking for something through its website. Yes, people launch Google and Facebook every day, and they go to Amazon once or twice a week. But the audience reach is already comparable, and the percentage of conversion of clicks into sales from the store is higher by an order of magnitude.

In 2017, the company not only began to actively develop its advertising business, but also recruited a team of salespeople to lure large brands to the site and demonstrate the advantages of placing ads in Amazon search. Nike, Victoria's Secret, New Balance and other well-known brands would prefer to sell on their website and advertise it somewhere on Google. But they are no longer able to do this. If you don’t sell on Amazon yourself, fakes or resellers will inevitably appear on it. Almost all large companies finally decided not to give them such a tasty morsel of the market.

In July 2017, the AAP (Amazon Advertising Platform) system opened to the public and quickly developed. It allows customers to buy advertising on the stock exchange, and run it on numerous sites, mainly controlled by Amazon (for example, IMDb). The platform is a lot like Google's DoubleClick. Some vacuum cleaner, which the user once thought about buying, then pursues it on third-party resources until he gives up and goes to Amazon to buy it.

Keywords

To expand the number of platforms on which to sell ads, the company bought a video game streaming service Twitch.tv for $ 970 million, and continues to invest in Amazon Video, which in the United States should bypass its only competitor, Netflix, in the coming years. Amazon makes its own TV shows and TV shows, in which the audience will be able to show ads in between (not to mention that both Amazon Video and Twitch work to attract users to Amazon Prime). In November 2017, Amazon Video announced the start of production of the most expensive television series in the world - based on "The Lord of the Rings." They will spend $ 1 billion on it, of which $ 250 million has already gone for the rights. For comparison, the season of the Game of Thrones now costs about $ 100 million.

On twitch

All this works like a giant machine, “sucking” users into the world of Amazon. If you are watching games on Twitch, it’s foolish not to try Prime so that you can support your favorite streamer for free. If you are buying something in a store, why not get access to movies and TV shows? The interface of the websites was restructured so that the cross-promotion of Amazon products on them seemed natural and organic. But the more time a user spends in the whirl of Amazon, the more advertising he consumes, ranging from ads with products and ending with videos. Even on the boxes in which the company packs things, movie posters or photos of products that could still be bought begin to appear. There are also ideas about the sound ads exchange for Alex - the type of ones that may sound on the radio.

Amazon is still focused on growth, but both investors and experts understand that it has almost nowhere to develop in the e-commerce market. It's time to start reaping the fruits of your labor: increase commissions from sellers, open your platforms to the public, and receive the profit that the company has been postponing for so long for tomorrow.

On IMDb

Hence the unprecedented growth of the company's shares in 2017 and the beginning of 2018. Amazon has already bypassed Microsoft and almost caught up with Google in terms of capitalization, although the net profit of all its competitors is several times higher. All on the expectation that Jeff Bezos, having completed the training, will soon pull the lever, and will start earning as much as the company and its assets have. Begin selling ads on Amazon.com and launching the AAP platform - steps in this direction. In retail, according to financial analyst Stephen Mallas, the company is able to “take off” 5% of the profit from the sale of the product. On advertising, the yield can be increased to 20-30%. Placing ads under the search results and pushing sellers to fight for "a place in the sun" can become the most profitable part of the business of the main online store.

Interestingly, the very idea of ​​the marketplace once was that for the seller this is an advantage over conventional supermarkets, because there is no need to pay for the shelf. For the buyer to see your product, for the advantageous presentation of it, etc. Now, Amazon is actually starting to return us to that same old classic pay per shelf model. Only in the new electronic century, and on a much larger scale.

PS

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