Technology

Amazon stacks adverts in search outcomes as huge manufacturers pay for placement

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The Amazon logo is displayed on a smartphone and a PC screen.

Pavlo Gonchar | LightRocket via Getty Images

Search for “toothpaste” on Amazon and you’ll see a mix of popular brands like Colgate, Crest, and Sensodyne at the top of the webpage. Try a separate search for “Deodorant” and you’ll see Secret, Dove and Native products first.

However, if you take a closer look, you’ll find that these listings are ads that have been labeled “Sponsored”. Amazon generates high revenue with the top consumer brands as a valuable placement on the largest ecommerce site comes with a rising price.

“There are fewer organic search results on the page, so the only way to get there is always to buy yourself there,” said Jason Goldberg, chief commerce strategy officer for advertising firm Publicis.

For consumers searching for toothpaste on Amazon, it takes two full swipes on the mobile app to get unpaid results.

An example of a mobile search for “toothpaste” on Amazon shows a sponsored branded ad at the top of the results.

Until recently, Amazon placed two or three sponsored products at the top of search results. Now up to six sponsored products can appear in front of any organic results, with more promotions elsewhere on the page, said Juozas Kaziukenas, who runs e-commerce research firm Marketplace Pulse.

The number of ads that appear differs depending on the exact search term and other factors, such as whether users shop on desktop, mobile, or in the Amazon app, says Amazon.

While Amazon doesn’t generate any advertising revenue, ads make up the bulk of the company’s “other” sales. This category was the fastest growing part of Amazon’s overall business in the second quarter. Revenue increased 87% year over year to more than $ 7.9 billion.

In 2018, Amazon overtook Microsoft to become the third largest advertising platform in the US, behind Google and Facebook. Taking advantage of its market control, Amazon knows that its website or app is where many consumers begin their online shopping journey.

Kaziukenas said Amazon and founder Jeff Bezos had completely switched from anti-advertising. It has become such a lucrative business that advertisements have “replaced most of the functionality of the website,” he said.

An Amazon spokesperson said there were no dedicated ad slots in search results, meaning a user could see one ad, multiple ads, or none at all. The company said advertising is an optional service for brands and sellers, but it can improve the visibility of their products.

“Like all retailers, we design our shop so that customers can easily find and discover the right brands and products. “In all cases, we work from the most useful customer experience and relevance of the results, regardless of how they are presented to the buyer.”

Large consumer goods manufacturers aren’t the only ones claiming the most valuable virtual real estate. Amazon also fills search results with its own products. For example, a search for “shampoo” displays an advertisement for an Amazon branded Solimo bottle in front of advertisements for products from Pantene, Nexxus, L’Oreal, and others.

According to digital marketing agency Merkle, sponsored product ads made up around 73% of retailers’ advertising spend on Amazon in the second quarter. Last year, Amazon began to replace product recommendations in listings with product ads.

Amazon has also added new ad formats like video ads and sponsored branded posts that feature a single brand and multiple product listings in a banner at the top of the page.

Ad prices go up

For brand owners, prices for stores on Amazon are rising as the company expands its dominance in online retailing.

The cost-per-click for Amazon search advertising was $ 1.27 in August, down from 86 cents a year ago, according to a survey by Canopy Management, an agency that supports businesses on Amazon, of more than 300 Amazon sellers.

Companies that don’t pay the toll will find their listings buried in search results. At the same time, sellers are paying more to Amazon overall for things like transaction fees and fulfillment services.

“It is now not uncommon for brands to spend 50% or more of their product price on various fees to sell on Amazon,” said Kaziukenas.

Competition has also intensified with the rise of Amazon aggregators, venture capital backed companies that raise large sums of money from outside investors to buy independent sellers. Some smaller sellers fear that they may not be able to compete against aggregators with large pockets who bring in “massive budgets for Amazon, including in the form of advertising,” Kaziukenas said.

“You are going from competing with other, smaller vendors to competing with massive and well-funded vendors,” he said.

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