Last week, Amazon announced that Amazon Product Ads will be discontinued as of October 30, 2015. Amazon will no longer show product ads at the bottom of search results that lead to third party retailer or manufacturer sites.
A LITTLE HISTORY ON AMAZON PRODUCT ADS
Amazon.com, whose stated mission it to help people “find, discover and buy anything online” launched Amazon Product Ads as a cost per click advertising model to enable item selection beyond what could be purchased on Amazon.com itself. Amazon Product Ads has since become a high performing ad unit for sellers who either could or would not sell on the Amazon marketplace due to strategic concerns, budget limitations, or category competitiveness.
Amazon Product Ads offered sellers in un-gated categories the opportunity to garner highly qualified traffic from Amazon.com and bring those customers to their own website. More and more advertisers took advantage of Amazon Product Ads to advertise their products on Amazon.com, leveraging high volume traffic, yet still controlling the customer experience, protecting transactional data and maintaining margins.
Over the years, Amazon has quietly become an advertising platform phenom and is expected to generate $1.26B in advertising revenue in 2015 (eMarketer). With Amazon Product Ads, Amazon successfully followed a strategy of turning what it knew about is customers into a contextual advertising product that effectively monetized visitor traffic not yet ready to buy on Amazon.com.
However, Amazon seems now to have clearly recognized that there may be more value in owning the shopper data as a means to protecting its long-term market share, as opposed to generating short term online advertising revenue. With the discontinuation of Amazon Product Ads, Amazon will now be keeping more customers on its site.
The elimination of APAs will be a disappointment for many retailers. Amazon Product Ads is a major revenue producer for many CommerceHub customers and has grown faster than other major CSEs combined.
WHAT IS A BRAND OR RETAILER TO DO?
Merchants considering how to replace the loss of APA driven revenue have a couple of different options to consider when thinking through their marketing strategy for the remainder of 2015 and into 2016. Here is quick run-down of our recommendations.
1. Maximize existing investments in Amazon Product Ads
In the short run, do everything you can to maximize revenue and generate as many new customers as possible using Product Ads. The countdown has started and you have three months. If APAs are performing well for you, you should consider increasing your investment in order to take advantage of the 175M users (March, 2015) who visit Amazon’s websites per month.
2. Evaluate Amazon Text Ads
Officially out of beta, all account holders have now been opted into Amazon Text Ads. This new ad unit is very similar to Google AdWords and is now starting to replace real estate on Amazon.com that used to be populated with ads via AdWords through the Google Search Partner Network.
Last year the Wall Street Journal reported that Amazon was planning to replace third party ads with a new in-house ad placement platform and was testing new ad types. Amazon Text Ads is a direct outcome of this announcement. The new Text Ad program relies on the same Seller Central interface used for Amazon Product Ads and functions almost identically to an earlier version of AdWords in that it is CPC based, supports keywords, utilizes keyword match types, includes similar content, allows daily campaign budgets and offers the ability to schedule start/end dates for campaigns.
If your strategy doesn’t including selling on Marketplaces for a variety of reasons, we recommend that you consider testing a small amount of spend against the new Amazon Text Ad unit and closely watch performance. In fact, CommerceHub did just this in partnership with one of our clients as part of the Amazon Text Ad pilot program.
Working with a large American manufacturer and retailer of consumer products, CommerceHub rolled out a modest initial investment over a two month period and saw a solid return of almost 6:1 in revenue, utilizing the keyword list that was also being used in Google AdWords. Because of lower volume, CommerceHub was able to use more “head” or generic terms that would normally not be utilized in Google AdWords due to relevancy and excessive impressions and with less strict match types in place leading to a greater ROI.
While we don’t expect ROI for Amazon Text Ads at the level of Amazon Product Ads, this is still an opportunity to capture traffic for future marketing and merchandising purposes. Additionally, you will be better positioned when and if Amazon replaces Google’s text ads entirely with its own.
3. Consider Amazon Sponsored Products
Amazon Sponsored Products is a CPC ad unit that allows merchants to promote products they are selling through the marketplace on Amazon.com. These ads appear in the right rail or under the search results. Instead of sending a customer to the advertiser’s site, a sponsored ad takes a customer to an Amazon marketplace product page.
About 10% of CommerceHub clients currently use Amazon Sponsored Products. We have found that this ad unit helps increase the exposure of products already listed on Amazon and is a great fit for a spectrum of products sold through the marketplace including those that already have a high Buy Box win percentage or new and unique products that have low visibility but high sales goals. At CommerceHub we have seen Amazon Sponsored Products improve product visibility and drive product listings from Page 10 to Page 1 in natural search results.
4. Shift budget and focus to other marketplaces and channels
Consider investing more resources into Google’s Product Listing Ads, Bing Product Ads, social platforms such as Facebook and other growing product discovery engines like Polyvore, Pinterest, and Houzz. There is a huge opportunity for brands and retailers to expand their merchandising efforts across these channels and capitalize on these potential sources of customers and revenue. Savvy merchandisers need to ensure they have a replacement to the expected continued decline of traditional CSEs and the discontinuation of APAs.
As a current CommerceHub client, we encourage you to reach out to your Marketing Manager to discuss merchandising options in light of the eventual discontinuation of Amazon Product Ads. Or, if you would like more information on how you can start working with CommerceHub to maximize your product merchandising and marketing capabilities, please reach out to us now.
Also check out Elizabeth’s post “Amazon Text Ads: To Do or Not To Do?” on Search Engine Watch.