CNBC are reporting that Google is losing hundreds of millions of dollars in search advertising revenue to consumer brands that are finding more success buying ads with Amazon.com. Citing six unnamed sources in the advertising industry, CNBC goes on to report that, in some cases, specific consumer-packaged brands have reportedly shifted half of their search ad budget from Alphabet Inc.-owned Google to Amazon.
Chris Apostle, executive vice president and head of performance for North America at Havas Media, told CNBC:
“Over 90 percent of searches for products that start on Amazon end with a purchase, even though that user may end up on social channels, ... The bang for your buck is where people are ultimately going to buy.”
Whilst this does make sense, there is a risk here that short term rewards are being traded off against long term return on investment.
Moving ad spend from Google to Amazon makes a lot of sense if you are looking to shift physical or digital products and have them available on Amazon.
The user's intent is much clearer on Amazon - if they are there, then they are there to shop and hopefully buy. Sales people used to be taught to read "buying signs" - being on Amazon is a buying sign.
However - selling through Amazon should always be viewed as having a lower return on investment as whilst you gain the sale, you lose margin and (more importantly) you lose the customer. You may be able to re-convert a small number of customers to registering with your brand for warranties or additional content/services but many will be, and will remain, Amazon's customer. You don't even get their email address; any communication with the customer will be through Amazon and under Amazon's control.
In that context, this could be a short term shift - better ROI short term in terms of sales, lower ROI long term as the need to advertise for second and subsequent sales will not be reduced by the use of alternative channels such as email marketing.
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