Amazon Stacks Ads In Search Results As Big Brands Pay For Placement

Search for “toothpaste” on Amazon and the top of the web page will show you a mix of popular brands such as Colgate, Crest, and Sensodyne. Try a separate search for “deodorant” and you’ll see products from Secret, Dove, and Native first.

Take a closer look, however, and you’ll notice that these ads are ads with the “sponsored” tag affixed to them. Amazon generates significant revenue from the best mainstream brands because getting a valuable placement on the biggest ecommerce site comes with an increasing price tag.

“There are fewer organic search results on the page, which increasingly means the only way to get there is to buy your way,” said Jason Goldberg, director of business strategy for the company. of Publicis advertising.

For consumers looking for toothpaste on Amazon, getting unpaid results requires two full swipes on the mobile app.

Until recently, Amazon put two or three sponsored products at the top of search results. Now, there can be up to six sponsored products that appear before any organic results, with more promotions elsewhere on the page, said Juozas Kaziukenas, who runs e-commerce research firm Marketplace Pulse.

The number of ads that appear differs depending on the exact search term and other factors such as whether users are shopping on a desktop, mobile, or in the Amazon app, Amazon says.

While Amazon does not allocate ad revenue, ads account for the majority of the company’s “other” sales. This category was the fastest growing part of Amazon’s overall business in the second quarter, with revenue up 87% from the previous year to over $ 7.9 billion. dollars.

In 2018, Amazon overtook Microsoft to become the third largest advertising platform in the United States, behind Google and Facebook. Amazon capitalizes on its control of the market, knowing that its website or app is where many consumers begin their online shopping journey.

Kaziukenas said Amazon and its founder Jeff Bezos have completely gone from being anti-advertising. It has become such a lucrative business that advertisements “have replaced most of the functionality of the site,” he said.

An Amazon spokesperson said there is no dedicated ad space in search results, which means a user can see one ad, multiple ads, or none. The company said advertising is an optional service for brands and sellers, but using it can improve the visibility of their products.

“Like all retailers, we design our store to help customers easily find and discover the right brands and products, and sponsored ads are one of the many ways we do this,” the carrier said. speech in an email. “In all cases, we work from the most useful customer experience and the relevance of the results obtained, however they are presented to the customer.

The big manufacturers of consumer products aren’t the only ones grabbing the most valuable virtual real estate. Amazon also fills the search results with its own products. For example, a search for “shampoo” results in a promotion for an Amazon Solimo brand bottle before advertisements for products from Pantene, Nexxus, L’Oreal and others.

Sponsored product ads made up about 73% of retailer ad spend on Amazon in the second quarter, according to digital marketing agency Merkle. Last year, Amazon started replacing product recommendations in listings with product announcements.

Amazon has also added new ad formats, such as video ads and sponsored brand posts, which feature a single brand and multiple product listings in a banner at the top of the page.

For brand owners, the price of doing business on Amazon increases as the company expands its dominance in online commerce.

The cost per click for Amazon search advertising was $ 1.27 in August, down from 86 cents a year ago, according to a survey of more than 300 Amazon sellers by Canopy Management, an agency that helps manage sales. businesses on Amazon.

Companies that don’t pay the toll see their ads buried in search results. At the same time, sellers are generally paying Amazon more for things like transaction fees and fulfillment services.

“It’s not uncommon now for brands to spend 50% or more of the price of their products on various fees to sell on Amazon,” Kaziukenas said.

Competition has also intensified due to the rise of Amazon aggregators, venture-backed companies that raise a lot of money from outside investors to acquire independent sellers. Some smaller sellers worry that they won’t be able to compete with deep-pocketed aggregators, which bring “huge budgets to spend on Amazon, also in the form of advertising,” Kaziukenas said.

“They are moving from competition to other smaller sellers to competition from massive, well-funded sellers,” he said.

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