By default, when you hunt for something on Amazon, the filtering is configured in a manner to fetch you “featured” items only. This is Amazon’s strategy of presenting you with a shortlist of ‘curated products’ that they believe will be most beneficial to your purpose of buying. That is, at least, what they believe. However, at the very beginning of every page, you’ll frequently notice results labeled “Sponsored”. They only appear at the top because some merchants choose to pay Amazon a price to have their products rank higher in the search. Amazon, it turns out, is incredibly proficient in this regard, as evidenced by their most recent financial results.
In Q4 of 2021, the firm generated $9.7 billion through ad sales, a 32% increase. year on year. Amazon garnered around $31 billion in ad sales last year. This is more than YouTube’s ad revenue. It is more than the worldwide newspaper sector’s ad revenues. Even by Amazon’s lofty measures, it’s massive. So huge, in fact, that this apparently modest source of income was previously classified as “other” in the company’s financial statements. That is, until now. Amazon is more than glad to announce that its advertising business has advanced.
In some respects, this was arguably far overdue.
Amazon is the world’s largest retailer. Monthly, close to 200 million people visit the website in the United States alone. And the business maintains track of every visit and query made on its site. In essence, Amazon’s algorithms are aware of what folks look for, what they purchase, what they put in their cart, their wish list, and everything else.
This is an all-you-can-eat feast for ad companies and businesses. Do you want your product to rank higher up on the page? Invest heavily in a promoted banner ad. Do you want to show off your products to the public? Pay Amazon to display a little clip on the front page. Do you want something more? If you purchase an ad spot on Amazon, you’ll attract a consumer who is quite likely to make a transaction. This is the most valued type of client.
According to certain statistics, every 3 out of 4 shoppers are likely to begin their online search for a product on Amazon. In this regard, Amazon advertisements provide marketers with an increased cost-to-benefit ratio when compared to ads put on social media or even YouTube. They’re also not in your face. You could miss them totally if you don’t see the sponsored label.
Apparently, Apple’s privacy changes have had no impact on Amazon’s ad revenue. The changes wreaked havoc on Facebook and Google’s ad businesses, which rely heavily on smart behavioral data. And when Apple severed this connection, their ad sales plummeted. Amazon, on the other contrary, is heavily reliant on data collected through its own website and app. Something that is unaffected by changes to Apple’s operating system.
In addition, the Amazon ad engine is quite low-key. It employs keyword-targeted adverts, which allow marketers to promote products associated with a set of terms. That is, a perfume manufacturer will pay to have its product featured when people search for “perfume” or “deodorant.”
Nonetheless, as total ad spending has risen, Amazon has begun to provide sponsored products under its suggested section, such as “Products related to this item” or “More items to explore.” Weakening users’ resolve to research these promoted offerings.
Ad revenues are currently Amazon’s third-largest income generator, after only digital sales and AWS (Amazon’s cloud division). Its advertising division now earns a higher yearly income than its conventional outlets, Amazon Fresh, and other businesses ($17 billion) and almost the same amount as its subscription services (SVOD) – Amazon Prime – ($31 billion).
So, Amazon is certainly not the first company that springs to mind when you think about advertising. The Everything Store is exploding, thanks to minimal advertisements.
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