Now, it’s a major contender in the streaming wars.

How will the tech-turned-everything company approach programmatic advertising?

In 2013, Digiday called Amazon the ‘sleeping giant’ of media. Now, it seems, the giant has awakened.

In this post, we’re talking about Amazon, the media company, not necessarily Amazon, the eCommerce platform.

Amazon has slowly transformed into a media company, replete with the Fire Stick, Kindle Fire, Amazon Prime, and owned and operated sites like IMDb.com.

What has Amazon done with this owned content, and where is it going?

Amazon, the Third Largest Ad Platform in the US

Now firmly established as a media company, Amazon has quickly increased its advertising game.

“For more than a year now there’s been a steady murmur about Amazon’s encroachment on the territory of the Facebook-Google duopoly,” writes Nicole Perrin in a report for eMarketer.

But Amazon is slowly taking a piece of that total digital ad spend, percentage point by percentage point.

In 2018, Amazon accounted for 4.1 percent of all digital ad spending in the U.S.

In 2021, Amazon was expected to account for 8 percent of the digital advertising revenue; by 2026, that number will reach 13 percent.

It doesn’t sound like much, but it makes Amazon the third-largest programmatic ad platform in the U.S., behind Google and Facebook. In 2021, Google, Amazon, and Facebook accounted for 64% of all US ad spending.

Amazon isn’t exactly new to the programmatic advertising environment. Kindles have been around for a decade, and Amazon has offered sponsored spots at the top of its results pages for at least as long.

But the company has made critical changes to how it approaches programmatic advertising—changes that may contribute to making it a bigger player.

Amazon’s advertising business grew by 19% in Q4 2022, while Google and Meta saw ad revenue slow. That said, Facebook still beat estimates in Q4.

The growth is particularly impressive given the recession and financial anxiety many people are experiencing. But it does highlight the premium advertisers are putting on retail media networks and where they’ll fit into media mixes for years to come.

Where Is Amazon Going With Programmatic Advertising?

The ‘first steps’ in doubling down on programmatic advertising came in September 2018, when Amazon consolidated its advertising offerings.

Before, advertisers had to navigate Amazon Marketing Services (the full suit of CPC ad formats), Amazon Media Group (the unit that sold display ads on Amazon devices and properties) and the programmatic advertising platform itself. Now, these are all operated under one roof as Amazon Advertising.

“We’ve unified our product offerings under the name ‘Amazon Advertising,’” said Paul Kotas, SVP of Amazon Advertising. “This is another step towards our goal of providing advertising solutions that are simple and intuitive for the hundreds of thousands of advertisers who use our products to help grow their business.”

With simplification and accessibility as the goal, Amazon offers five features in one console:

• Sponsored Products specifically for the eCommerce platform
• Display ads for both Amazon and third-party sites
• Video ads for Amazon devices and properties like IMDb
• Amazon Stores to create branded stores
• Amazon DSP for CPC bids and monitoring

What does this mean for Amazon’s expansion into the programmatic advertising market?

Garett Sloane at AdAge writes that while there won’t be a major difference in the status of Google and Facebook as a duopoly, there will be a differential in what Amazon offers. “No other major platform is so plugged into what consumers buy,” Sloane writes. “Amazon doesn’t need to close the loop from ad to sale by reading uncertain data about when a person saw an online ad and when that led to an actual purchase. Amazon is the loop.”

That difference means Amazon will continue strengthening its impact on the programmatic advertising market. And it will certainly change what, why and how advertisers buy on a programmatic platform.

Retail Media Is the Future

Amazon isn’t just walking on Google and Facebook’s hallowed ground. It’s also ushering in a new era of advertising: retail media.

According to WPP’s GroupM, retail media represents 10.7% of global ad spending and is expected to grow 60% by 2027. The growth is staggering, but it makes sense.

Retail media networks give advertisers instant access to shopper-level data they can use to hyper-target consumers. For example, advertisers for Colgate could target Amazon shoppers who’ve bought a competitor’s product in the past 30 days.

That level of precision would catch the attention of advertisers under normal circumstances. Still, given the impending demise of third-party cookies and Apple’s App Tracking Transparency, the value increases exponentially.

As retail media continues to go mainstream, Amazon will evolve.

At the same time, other retailers looking to get a piece of the pie will invest. Walmart and Target are prime examples.

For more insights, sign up for MediaRadar’s blog here.

By now, it’s clear that Amazon Prime Day is a big shopping day. Like any other shopping holiday, Prime Day has a lot of advertising behind it — both from the eCommerce giant and its partners. 

Here’s how the big day affected both Amazon and retailers on the platform in 2019. 

Amazon Advertising Ahead of Prime Day 

The loss leader of holidays, Prime Day is used as a catalyst to attract new Prime customers and drive the sales of Amazon devices.

As more of Amazon’s competitors offer competitive shipping, Amazon heavily promoted the other services (like music, video, and Kindle) users receive from a Prime Membership during Q2. The hope was to convince potential customers to sign up ahead of Prime Day. Amazon is also known to discount their own devices during Prime Day. The two top Amazon selling products from 2018, the Echo and Fire TV products, both received YoY increases in ad support. 

Consider these additional insights from the MediaRadar research team: 

• Looking at the month before Prime Day (June), Amazon ad spend was 28 percent higher in 2019 compared to 2018.
• In the build-up to Prime Day itself, Amazon promoted the shopping holiday heavily on linear TV, with a 17 percent YoY increase compared to the first two weeks of July in 2018. 
• In Q2, Amazon almost doubled the ad spend behind Amazon Prime Video and its original content when compared to 2018. 
• The company also spent over $15mm promoting Amazon Prime Wardrobe during Q2, a new feature launched last September. Other Prime services, like Amazon Prime Music and Amazon Prime Pantry, also received increased ad promotion YoY.

How Prime Day Affects Advertisers on the Platform 

Prime Day represents both an opportunity and a challenge for third-party sellers. On one hand, there is an unquestioned influx of shoppers — especially for an otherwise dead shopping season. On the other hand, the day requires no small amount of adjustments. 

Amazon Prime Day requires advertisers to both rejigger paid acquisitions and deals and — according to some reports from this year — increase their ad spend to maintain their market share. 

Kiri Masters at Forbes writes that Amazon-endorsed deals for Prime Day are essentially offered on a pay-to-play basis, requiring larger brands to increase their spend and smaller brands to come with with DIY deals. At the same time, otherwise straightforward cost-per-clicks ads skyrocket around the holiday. Some Amazon consultants saw CPC fees of over $20 during the 48 hour sale. 

In other cases, larger advertisers are asked directly to double advertising budget to maintain their market share during Prime Day — even if they don’t necessarily fit the narrative. “One of our CPG clients was asked recently by Amazon to increase its budget by a minimum of 100% to ensure that it did not lose market share during this key sales period,” marketing consultant Debbie Ellison told CNBC. “In the case of this client, its products are not natural deals for Prime Day so taking part would only reduce their overall margin.” 
In other words, Prime Day is an uncertain affair for many Amazon advertisers. But there’s no question that Amazon made out like a bandit for the 2019 shopping holiday.

The predictions below come from Todd Krizelman, CEO and Co-Founder of MediaRadar.

Amazon’s ascent selling advertising is remarkable. In an already crowded market, it showed that it could insert itself. That’s why MediaRadar CEO, Todd Krizelman, envisions a prosperous year for the multinational technology company.

Some will find this prediction obvious, but this is hardly the case! 

There is nothing inevitable about Amazon‘s success. Even this seemingly immortal powerhouse has been met with some failures.

Amazon‘s Flop

In June 2014, the company announced the launch of its first smartphone: Amazon Fire.

According to Wired, in a desperate attempt to seem “cool” and push Amazon Prime members to purchase more product, founder and CEO, Jeff Bezos, created a phone. It had interesting party tricks, but was way too expensive and lacked certain capabilities smartphone users really wanted.

CNET noted that the Fire had 3D graphics and Firefly, which let consumers scan and identify thousands of products, songs, and bar codes and, then, make purchases via Amazon. But, what the phone didn’t have was access to Google Maps, Gmail, Apple iTunes, or even the Starbucks Coffee app. Plus, the starting contract price was $650.

Three months later, Amazon took a $170 million loss on the Fire phone.

Though publicly damning, this defeat taught the company a lot about mobile and, in the words of Baird analyst Colin Sebastian,  it also taught Amazon “that everything they do won’t be a success.” Nothing says e-commerce acumen is transferable to building a mobile phone, or even a successful media business.

Why is Amazon Really Successful?

The company’s success is not innate, or the result of its scale. Instead, most of its accomplishments are the result of separate factors like better general management as well as …

A Culture that is Rabid

The cornerstone of Amazon is its customers, as the CEO has preached over and over again.

Not only has this become a defining principle, but, after being woven into the company’s overall strategy, it has also become one of the business’ most lucrative moves, according to an article by Business Insider.

In 2005, Bezos developed Amazon Prime, a paid subscription service that guarantees free delivery in two days, knowing full well that customers love free shipping and successful, timely deliveries.

While Jeff Bezos is customer-obsessed, buyers have become Amazon Prime-obsessed. The free and fast shipping first enticed members while the numerous other perks got them hooked.

The company even created Amazon Dash and Amazon Prime Now, which shortened delivery times to just hours.

Other perks include early access to lightening deals, unlimited photo storage, and new television and movies as well as deep discounts on products like video games, free books, commercial-free music, and even the ability to share these rewards with others.

Two cards, the Amazon Prime Rewards Visa Card and the Amazon Prime Store Card, also came about, offering members 3% rewards back for Amazon purchases, 2% at restaurants, gas stations, and drug stores, and 1% back for all other transactions, according to an article by One Good Thing.

Then, there was Prime Pantry, which relieved the stress of food shopping, and Prime Family that offered a 15% discount on eligible products and 20% off diapers, reported TheStreet.

All these efforts aim to keep customers shopping with Amazon and, for the most part, they’ve really worked, as shown by the growing list of rave reviews.

Experience Launching New Companies

Amazon has sprouted many new divisions or, in another sense, smaller companies.

In addition to Amazon Prime, it also successfully launched Amazon‘s Storefront Portal, Amazon Web Services (AWS), and others.

Amazon‘s Storefront Portal became another section of its site that lists products sold solely by small businesses.

AWS is a secure, cloud computing platform that offers reliable, affordable, and scalable services.

If Amazon has the necessary resources and knowledge to start multiple businesses, it can most likely continue doing so, profiting and expanding.

Brand and Data Safety

Instances of brand safety violations and data breaches were publicized, beginning in 2017. Big companies like Google, Facebook, and Twitter were under fire.

Perhaps, the most notable transgression was YouTube‘s. Following the egregious placement of ads alongside neo-Nazis and pro-ISIS videos, the video-sharing website lost 5% of its top advertisers in the US and Canada.

Unlike YouTube, Facebook, Google, and Twitter, Amazon hasn’t committed any brand safety violations or data breaches. For the most part, that’s why the company has remained trusted by consumers and financially stable in the past couple of years.

Conclusion

We forecast 2019 to another superb year for Amazon.

As we look ahead, expect divisions of the company like AWS, Amazon‘s Storefront Portal, and Amazon Prime — as well as the growth of Amazon as a whole — to flourish in 2019. Any developments by the company will also add to its success next year, and beyond.

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As a fierce and innovative competitor with other online and brick-and-mortar stores, Amazon tends to be the first one to advertise. For instance, the company forced other retailers to kick-start their back-to-school ad campaigns even earlier in the summer when it made July 19th Amazon Prime Day.

Is it the holiday season already? According to Amazon, it is.

It isn’t so surprising that the company kicked off holiday advertising this year. Amazon, the popular e-commerce and cloud computing company, started its holiday preparations in early November rather than in the festive month of December like most other advertisers.

To kick off the merriment, Amazon launched a TV advertisement entitled “Amazon Holidays 2018 – Can You Feel It.” Check it out below!

This commercial ran on over 70 different TV networks, including Telemundo, since being released in early November. The company spent an estimated amount of $15 million on the advertisement alone. Amazon also employed an integrated advertising strategy here. Viewers can hear Amazon‘s virtual assistant say, “Alexa, turn on the lights,” so, not only is the commercial highlighting Amazon Prime, but it is also showcasing other Amazon products like Alexa.

Here are a three theories as to why Amazon decided to run an ad so early on in the year.

1. It’s an e-commerce company, which relies heavily on certain delivery services

There is always the potential for shipping delays or failures when it comes to FedEx or the U.S. postal service, both of which are services that Amazon uses. To prevent customers from not receiving their purchases in time for the holidays, the company had to start advertising earlier to give itself more time and leeway to correct potential delivery issues.

2. Hanukkah comes early this year

Hanukkah is an eight-day long Jewish Festival of Lights. Traditions include lighting the menorah, playing the dreidel game, eating gelt and latkes, and, of course, exchanging a different gift each night during the holiday. Hanukkah, where most celebrators give or receive at least eight presents, is the perfect holiday for Amazon to capitalize on. The company can entice people to buy and request their Hanukkah gifts from Amazon.

This year, Hanukkah falls unusually early. While it normally lands near Christmas Day in late December, the 2018 holiday happens between Sunday, December 2nd and Monday, December 10th. If Amazon wanted to make the Hanukkah celebrators customers, then it had to start advertising earlier on in the year to give potential clients time to make their purchases.

3. It was a small hint for viewers before the big announcement that one of Amazon‘s newest headquarters would be in Long Island City, New York

Towards the end of this commercial, New York City appears on the screen. Following this, the ad pans to the little girl in her bed with her finger to her lips, signalling a special secret she has. The ad then closes in on the girl’s dresser and a snow globe, which seems to have captured the city of New York. These scenes acted as clues that Amazon was opening a second warehouse in New York. The public announcement wasn’t made until Tuesday, November 13th of this year.

Conclusion

Amazon is an advertising powerhouse within its industry. Executing an innovative ad strategy full of fresh ideas like its new partnership with Elfster make the company so effective. The fact that it starts advertising early for certain holidays and events may be a signal to other advertisers to do the same. If they do, perhaps, they too could be super successful like Amazon.