In 2006, Amazon became much more than an ecommerce giant with the launch of AWS, their robust cloud computing platform. This new platform was key in helping Amazon capture and capitalize on vast quantities of highly-relevant data. The resulting boost to their bottom line and share price has been astonishing. Today, Amazon’s ability to monetize their understanding and application of data has given birth to a new revenue center in digital advertising.
For more than a decade, Google and Facebook have dominated the digital advertising space. Together, in 2018, the duopoly controlled more than 56% of all digital ad spend in the USA. However, that same year, for the first time ever, eMarketer reported a decline in both Facebook and Google’s market share.
From 2017 to 2018, Google’s market share declined from 38.6% to 37.2% and Facebook’s declined from 19.9% to 19.6%. These are small percentage points—together it’s only a 1.5% drop in market share. So what’s the big deal?
The shifting balance in market share is a direct result of Amazon’s rapid rise in the digital advertising sphere. Amazon’s digital advertising offering, known as Amazon Advertising Platform (AAP), has quickly challenged Facebook and Google’s dominance. Fast forward to 2019 numbers and 2020 projections, Amazon’s market share is expected to increase to 8.6%.
To add some more fuel to Amazon Advertising’s conquest of the digital ad space, Citi Research analyst Mark May forecasts that by 2028, Amazon Advertising revenue will exceed $50 Billion. That’s a 500% increase over the $10 Billion in revenue that was recorded in 2018.
For many CRMs, portals and marketplaces, Amazon’s rising dominance in the digital advertising world signals a tremendous opportunity for their own revenue centers. While they may not be creating billion-dollar revenue streams, taking a page from Amazon’s playbook can help CRMs, portals and marketplaces create their own lucrative advertising houses.
What is the key to Amazon’s rapidly-growing marketing dominance?
May is quick to answer the billion-dollar question with a simple formula for Amazon’s success: “Amazon has some obvious potential advantages over Google and Facebook. For instance, unlike any other platform — even Google and Facebook — Amazon combines global audience scale and engagement with actual conversion and transactional data”.
May’s assessment lays out three key ingredients to Amazon’s recipe for their new multi-billion-dollar, duopoly-threatening revenue center:
- Global audience scale
- Conversion and transaction data
Let’s look at each of these in more detail.
Global Audience Scale
Statista reports that in February 2020, Amazon.com experienced over 2 billion combined desktop and mobile visits to their website. These numbers are large enough to make Amazon.com the 14th most visited web destination in the world. Amazon’s high traffic is impressive, but it’s equally important to acknowledge their substantial market share in each of their product categories. They command a large percentage of eyeballs on searches for all types of products, from home electronics to pet toys. In fact, today, more product searches start on Amazon then Google.
This massive, global audience presents myriad opportunities for data collection and the creation of targeted audiences, which is crucial to Amazon’s advertising strength. Business users of Amazon Advertising have access to thousands of potential customers all over the world. [KC2]
The second ingredient in Amazon’s advertising dominance is their ability to create targeted audiences from high-intent data. There are two contributing factors that leads to their ability to create these highly valuable audience segments. The first is Amazon’s feature-rich website, which promotes high engagement. The second is the amount of high-intent behavioral data that’s created from customers using these features.
To showcase how this gives an advantage when creating advertising programs, we will use Amazon’s Fashion product category as an example. Within this product category, a robust set of search features allows shoppers to sort products by size, brand, style, price range and more. Now, imagine millions of potential customers using these product filters to find exactly what they are looking to buy.
The high-intent, real-time data generated by this onsite behavior will create a custom audience that is incredibly valuable to merchants. For example, the brand Old Navy (known for their affordable clothing) will be interested in reaching an audience who is using the pricing filter to find less expensive clothes, whereas a designer brand such as COACH will want to reach the higher price point shoppers.
The number of custom audiences that these search features create is enormous. And the revenue potential of matching these audiences with merchants to run ads both on- and off-site is a major contributing factor to Amazon’s advertising prowess.
Conversion and Transaction Data
The third and perhaps most crucial component of Amazon’s advertising center is their access to conversion and transaction data. May cites that combining conversion and transaction data with engagement and a global audience is Amazon’s unique differentiator, for two main reasons:
- Closed loop advertising ecosystem: When merchants run on-site or off-site advertising programs through Amazon Advertising Platform (AAP) they direct traffic to their product pages within Amazon.com. This means the entire advertising experience, from click to purchase, is contained in one ecosystem, allowing for complete program attribution.
- Audience Targeting: When users search on a website, high-intent audiences can be created. Transactional data and conversion data go beyond intent by creating audiences of people who have performed the exact action an advertiser is looking for. These audiences can be excluded from advertising programs, become targeted audiences, or be used to expand audiences using lookalike targeting.
The Final Two Ingredients
Having a large market share within multiple categories, features that promote engagement, and conversion and transactional data creates a perfect environment for advertising success. However, we’d expand May’s theory to add two more pillars that further contribute to Amazon’s advertising center: Supply and demand, and self-service UI
- Supply and demand: Amazon controls both advertising supply and demand in one environment. Amazon has the supply (audience data) coupled with millions of sellers who want to use their audience data. This complements the next success pillar, a self-service advertising experience.
- Self-service advertising: Think of this as the wrapper that contains access to all audience data in one UI. Amazon’s self-service UI gives millions of merchants the ability to run their own advertising programs using Amazon’s ultra-valuable audience data.
While Amazon has certainly used its data knowledge to its advantage, these success pillars are accessible to CRMs, portals, and marketplaces to mimic and create new revenue centers for themselves. And sure, your new source of advertising revenue may not challenge the Facebook and Google duopoly (or can it?), but it might just open the door to a nice multi-million dollar opportunity!
How CRMs, Portals and Marketplaces can steal a page from Amazon Advertising’s recipe book
Amazon’s “ace up the sleeve” is their ability to fulfill inventory on the properties they control. From on-site search result listings ads to audio ads served over Alexa devices, Amazon has the impressions needed to fulfil the campaign promises made to merchants who purchase advertising programs. In most cases CRMs, portals, and marketplaces will need to seek other methods to fulfill advertiser programs. Fortunately, channels like Facebook and Google have robust APIs that address this issue directly.
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The below use cases assume that program fulfillment is completed through this non-endemic method of inventory fulfillment.
Use case for CRMs
CRMs may not be able to perfectly recreate the same pillars of Amazon Advertising, but they can play on their strengths to create a lucrative advertising opportunity nonetheless.
For example, they benefit from having a deep understanding of end-customer data. Through user accounts they gather customer and prospect contact information such as names, phone numbers, and email addresses. This seed data can be indispensable by allowing CRM users to create lookalike audiences and advertise to customers and prospects, providing value to users who want to communicate directly with their ideal audience.
When it comes to engagement, as previously stated, Amazon creates value when people use their search filters and create high intent data. CRMs are able to utilize contact data segmentation to achieve a similar result. When CRMs map customer data to create lookalike audiences, they create the same kind of value, allowing users to segment their customers and prospects by industry, location, or pipeline stage.
Additionally, CRMs can create the same type of closed loop advertising ecosystem as Amazon with their conversion and transaction data. Because CRMs visualize pipeline activity, they can show a one-to-one relationship between an advertising program and the amount of new contacts created, pipeline movement, or transactional value of a new account. CRMs know when new contacts are created via different campaign leads. Using this unique lead data lets CRM platforms offer users a valuable out of the box master targeting audience.
Use Case for Portals and Marketplaces
Portals and Marketplaces are similarly poised to capitalize on Amazon’s pillars of success.
Portals and Marketplaces don’t always need a global audience reach — rather, it’s much more important for them to attract the right niche audience. Like Amazon, portals bring together buyers and sellers, and benefit from their ability to create audiences based on real-time, high-intent signals.
Take Realtor.com (a portal) as an example. Their site generates high-intent signals when people search for home listings, so when someone searches for a home on Realtor.com and saves properties that fit certain attributes, users know this person has a high intent to buy this kind of home. Realtor.com’s recently announced Market Reach program uses this data to offer Real Estate agents the ability to serve ads on Facebook and Google to targeted audiences in near real-time.
Every portal will have their own way to collect and use this valuable user data.
Finally, like Amazon, transactions occur onsite, allowing portals and marketplaces to control the data and create a valuable closed-loop advertising ecosystem. Whether it’s an ecommerce transaction or lead generation, they have the ability to collect, store, and use their data to create valuable audiences that advertisers place a premium value on.
For Portals and Marketplaces, the combination of high-intent audience data and a closed loop advertising system, is the foundation for an amazing new advertising offering.
Amazon is challenging the digital advertising duopoly with their ability to, once again, harness the power of their data. Other organizations, such as CRMs, Portals and Marketplaces already have the infrastructure in place to allow them to capitalize on the same pillars in Amazon’s playbook to create a new, competitive revenue center.[KC3]
At Evocalize, we specialize in unlocking this exact opportunity for CRMs, Portals, and Marketplaces. Our embedded online marketing technology gives our partners the ability to enable users with sophisticated data-driven online marketing programs with the click of a button. If you would like to know more about the massive revenue opportunity that’s hiding in your data, contact us for more information.