The onset of COVID-19 lockdowns in 2020 allowed Amazon to reap massive gains, as consumers shifted a considerable amount of their spending from physical stores to the web. In 2021, Amazon’s global ad revenue reached an impressive 31 billion U.S. dollars, and seeing that the retailer continuously expands not only its service portfolio – including an expansion into brick-and-mortar retail - but also its influence on the global internet landscape, Amazon is giving tech giants like Google and Facebook a run for their (ad) money.
Amazon’s advertising businessAmazon has ranked among the leading U.S. advertisers for several years, constantly ramping up expenditures in one of its most profitable advertising markets. Amazon’s U.S. net digital ad revenue was projected to reach 32 billion dollars in 2022 - more than double the value of 2020 - and to enjoy a further increase of one quarter in 2023. While Google and Facebook still account for the largest digital ad revenue share in the U.S. at 29 and 24 percent, respectively, Amazon is quickly becoming a viable competitor to the Californian companies’ duopoly.
How does Amazon advertising stack up?Amazon’s appeal as an advertising destination has been growing consistently, with a quarter of U.S. retailers saying they spend more than 80 thousand dollars in advertising on the platform every month. U.S. retail marketers listed driving brand awareness and the acquisition of new customers as their primary goals for advertising on Amazon. Marketers pointed out to sponsored product ads as being not only the most common ad type on the platform, but also the one yielding the highest returns on advertising spending (ROAS).
Advertising on Prime DayAmazon Prime Day, Amazon’s annual online shopping event that features a variety of deals and discounts for its Prime members, has become one of the most heavily advertised e-commerce spectacles worldwide, coming in second after Black Friday as a shopping event driving the highest increase in sales. Spending for Prime Day advertising ballooned in 2021, with an increase of 94 percent compared to the previous year, and both the home and electronics product categories saw considerable surges in ad spending. Beauty and personal care ads took the podium for the largest impression growth among Prime Day ads, while home and kitchen commercials took the silver medal. What is more, Amazon allocated some 30 percent of its advertising budget towards mobile advertising ahead of Prime Day 2020, once again taking the dynamic changes in consumer shopping behavior into consideration, while Amazon’s website remained the most popular source of information for Prime Day shoppers.
Consumer and brand perspectiveU.S. consumer satisfaction with Amazon has remained elevated throughout the last two decades, with the Seattle giant outpacing social media and search engines in becoming the top source of inspiration for online shoppers throughout the country. When compared to ads on the open internet, ads found on Amazon were reckoned to be more effective in persuading consumers to immediately make a purchase, with almost one in two online shoppers clicking on articles purchased by other users in combination with the product they already selected.
Amazon's success can be partly attributed to the transactional relationship with its customers, who are buying something tangible from the platform, they know what to expect from it, they trust it. For Amazon that is a source of a plethora of consumer data, their needs as well as their shopping and search behavior, which in turn allows the ecommerce giant to easily serve better targeted ads.