Nicole Perrin, Principal Analyst at research firm eMarketer made an observation, “The pandemic zapped us two years into the future on the e-commerce side.” The pandemic and its disastrous effect on the economy in 2020, forced companies to take a long and hard look at their advertising plans and platforms.
This was proven with the increase in the global digital marketing valuation from USD 290 billion in 2019 to USD 305 billion in 2020. This growth is expected to further expand at a CAGR of 17.6% to reach an estimated valuation of USD 807 billion by 2026.
The reason for the quick rise of the digital marketing industry is the increasing penetration of the internet, smart devices and the increasing prevalence of social media platforms.
By 2020, the three giant tech companies, Amazon, Facebook and Google dominated the digital advertising sectors and the pandemic catapulted them into command positions of the entire advertising economy. According to GroupM’s provisional report, they collected the majority of all ad spending in the US in that year. Ad industry veteran, Tim Armstrong said - “These companies that are data-science-driven get stronger and faster with a tailwind of usage—and Covid was a hurricane.”
Triopoly Comparison – Amazon, Facebook and Google
The pandemic and the restarting of the economy in the year 2020 actually helped interactive advertising. This was visible in the quarterly financial announcements of the three big tech giants.
Alphabet, Google’s parent company, reported USD 55.3 billion in revenue for the March quarter of 2021, which was a 46% rise from the March quarter of 2020. The revenue of Facebook, almost completely from advertisements, was USD 26.17 billion in 2021, a 48% increase from the same quarter in 2020. Amazon’s much lower profile advertisement business showed maximum and the fastest growth of 77% from the March 2020 quarter. It reported a revenue of USD 6.9 billion in the first quarter of 2021. Amazon’s stunning growth is attributable to its horde of purchasing data, and it is now challenging Facebook’s advertisement revenue.
Amazon’s Rise in Digital Advertisements
Amazon began its advertisement business by offering display and search advertisements on its site. With time, the company added more ad products, with the result that its offering now resembles more to that of Facebook.
Brian Olsavsky, Amazon’s CFO, said in an interview that the company’s ad business profited tremendously from an increase in traffic during the pandemic. The company’s technology for delivering relevant ads is attracting attention.
Compared to Facebook, which understands product interest based on what its users socialize about and the sites they visit, Amazon’s real-time data is based on what people actually buy. This, in itself, is the best predictor of future product interest and is very attractive to advertisers. This is also a big reason for Amazon’s digital advertisement growth, which shows every sign of growing steadily in the coming years.
Reasons Why Amazon Ads Are Better Than Facebook Ads
By 2019, Facebook had emerged as one of the largest platforms for eCommerce marketing. As time went on, however, and the world of digital advertising advanced further, advertisers realised that Facebook’s audience-targeting metrics lacked focus as many of its users were exposed to advertisements completely irrelevant to their interests. Contrarily, visitors to Amazon had specific needs for which they were shopping.
There are compelling reasons for advertisers to begin shifting focus from Facebook Ads to Amazon Ads.
Ready to Buy Audience
More than 50% of online shoppers begin their product search on Amazon. The likelihood of that search converting to an actual sale is far more possible than on sites like Facebook or Google. Placing advertisements on Amazon is doing more than building brand awareness. It is the strategic time when users are ready to make a purchase, greatly increasing the chance of a sale.
Improvement in Organic Listings on Amazon
Sales volume on Amazon plays a significant role in the organic listing of products. The better a product sells, the higher are its chances of a priority listing when a search is initiated for a relevant product. For eCommerce brands, this is essential as, over time, it can have a snowball effect on sales. Comparatively, Facebook advertisements do not deliver this kind of direct benefit or boost when the marketing campaign ends.
Amazon Ads Enjoy a Higher Trust Factor
The product reviews that customers leave on Amazon have proven to be extremely influential. Qualtrics data reveals that 93% of customers check for product reviews before making a purchase. Sponsored Product Ads on Amazon are also more popular as they list the product as part of a user’s search result complete with a star rating. Reviews on a Facebook eCommerce advertisement are a part of the ad copy, and consequently, enjoy a lesser trust factor than Amazon’s reviews, which are left by actual customers.
More Advertisement Variety to Experiment
A Sponsored Product Advertisement, while very attractive, is not the only option for an Amazon ad. Sponsored Brand Ads, previously known as Headline Ads, usually appear above or below the search results, which advertise the brand or its latest product offering. Clicking on these advertisements takes the user to a custom landing page, gaining greater exposure to the business and its products.
Another unique option that Amazon Ads offers is Product Display Ads. These ads are usually displayed on the customer review page or as a ‘related product’ suggestion. These ads can generate a high revenue keeping the brand and company one step ahead of the competition. In comparison, Facebook ads are available in fewer formats and do not offer any other value-added services.
Amazon Ads offer various advertisement options that help eCommerce businesses and brands with many combinations for increasing sales. Even more importantly, these ads are dependent on keyword metrics rather than audience metrics. Hence, there is a greater possibility that the advertisement appears before relevant users, increasing the chances of an actual sale.
In a world that is competitive and increasingly digitized, these shifts in the way products are now advertised can have a huge impact on revenues. Amazon seems to have got the combination right. Currently, Amazon Ads are offering a far greater value proposition to advertisers than Facebook.
What are Amazon ads?
Amazon ads are based on a pay-per-click model just like ads on Google. The sellers pay when a visitor clicks on the ad, irrespective of whether they make a purchase or not.
How much does it cost to run ads on Amazon?
Most of the sponsored products, sponsored brands, and sponsored display are pay-per-click ads. This gives you the flexibility to set your own budget regarding how much you want to pay for a click.
Why are advertisers shifting focus from Facebook ads to Amazon ads?
The following are some of the reasons why advertisers are shifting their focus from Facebook ads to Amazon ads:
- Ready to Buy Audience
- Improvement in Organic Listings on Amazon
- Amazon Ads Enjoy a Higher Trust Factor
- More Advertisement Variety to Experiment
What are the types of Amazon ads?
The following are the most popular types of Amazon ads:
- Sponsored Product Advertisement
- Sponsored Brand Ads
- Product Display Ads
- Audio Ads
- Video Ads
- Custom Advertising
What is the worth of digital advertising spending worldwide?
According to Statista, digital advertising spending worldwide was calculated to be worth USD 521.02 billion in 2021 and the number is expected to grow to USD 876 billion by 2026.