Available Advertising Options

Amazon’s advertising falls into two broad categories: Amazon Ad Console and Amazon Demand Side Platform (DSP). Most emerging brands focus on Amazon Ad Console and its popular on-platform options like Sponsored Products. Demand Side Platform or DSP allows brands with bigger budgets and/or many stockkeeping units listed on Amazon to run more elaborate ad campaigns like retargeting on and off amazon.com.

AMAZON AD CONSOLE

What is it? Amazon Ad Console allows brands to run a variety of ads on the Amazon site like sponsored products and sponsored brands.

How does it work? Ad console is where you find Amazon’s popular pay-per-click (PPC) options. Brands pay for clicks, not impressions, and the clicks bring customers to a page on Amazon.com. Ad Console ads offer less customization for audience targeting than Demand Side Platform (DSP) offerings.

What is it best for?

• Smaller brands with limited advertising budgets and/or a handful of bestselling SKUs they want to focus on promoting.
• Brands starting out on Amazon that have less money to spend.
• “I suggest brands stick to Amazon Advertising (Ad Console with sponsored products and sponsored brands) to focus on generating reviews and building sales momentum,” says Smolinski. “Once they think they have hit the ceiling in sales, then I would add in DSP for retargeting, targeting competitors and also expanding reach off of Amazon.”

What are the Ad Console options?

• Sponsored products. The most well-known type of Amazon advertising, the overall spend on Amazon sponsored products ads grew 24% in the first quarter of 2020 as sales driven by the format grew 19%. Clicks also grew 14% in Q1.
• Sponsored brands. The sponsored brands spend grew a staggering 47% in Q1 2020. Sales attributed to the format grew 57%.
• Sponsored display. A self-service display ad option that appears on amazon.com and Amazon’s third-party sites that can drive views and traffic to products, pages or stores.
• Stores. Ads that send customers straight to Amazon-branded storefronts allow companies to customize how their brand is showcased on the platform.

AMAZON DEMAND SIDE PLATFORM

What is it? Demand Side Platform or DSP is an automated service that allows the management of multiple ads through a single interface. Amazon Demand Side Platform allows brands to manage programmatic digital media campaigns themselves, which means advertisers have extensive opportunities to drive awareness, consideration, and sales on and off the platform. Ads can be scaled to target shoppers across all Amazon owned- and -operated sites and apps as well leading publisher sites and mobile apps.

What is it best for?

• With Amazon Demand Side Platform, brands pay for impressions at a cost per thousand or CPM. DSP allows advertisers to programmatically buy display and video ads that can help build brand awareness and consideration. In addition to Amazon’s website, brands can use DSP to reach customers on Fire TV, IMDb, Kindle and other apps. According to Stella Rising, revenue from Amazon DSP is forecasted to rise 19% in 2020, an indication of the increasing willingness of brands to allocate large portions of their digital ad spend within the Amazon universe.
• With DSP, brands can slice and dice the audience for their ads through the platform’s robust targeting options that include contextual, lookalike, lifestyle and behavior-based segments.
• Retargeting ads and ads targeting competitive products
• Bigger brands spending $100,000 or more on Amazon advertising per year.
• DSP can be managed by Amazon, which requires a $35,000 minimum spend. Brands can also choose an Enterprise Self-Service (ESS) option, but companies must go through an authorized agency to access it.

What are the DSP Options?

• Display ads. Businesses can buy display ads whether or not they sell products on Amazon. Self-service Amazon DSP users can buy and manage their own display campaigns, while those seeking a managed-service option can work with Amazon ad consultants.
• Video Ads. Businesses can buy video ads whether or not they sell products on Amazon.
• Audio Ads. Ads that play on the free tier of Amazon Music across Alexa-enabled devices, including Echo and Fire TV, as well as on mobile and desktop.

Advertising Spend For Sales Traction

What are brands with profitable Amazon businesses actually spending on advertising, and how do they budget?

• Amazon specialists and most brand founders agree that advertising on the platform is incredibly important, if not essential. How much they recommend brand spend, however, varies, depending on the proprietary strategy.
• In Beauty Independent’s survey of independent beauty and wellness brands selling on Amazon, 79% of brands that currently sell on Amazon spend money on Amazon advertising. Of those that do, 67% spend less than $4,000 per month and only 12% percent spend over $4,000.
• Beauty and wellness brands that generate large volumes on Amazon understand that a percentage of their revenues should be earmarked for advertising to keep sales rolling. Vegan supplement specialist Ora Organic has been selling its entire assortment, except its samples packs, on Amazon since 2015. The brand is also carried at Ulta Beauty, Whole Foods, The Vitamin Shoppe, and other independent and chain retailers. Co-founder Sebastian Bryers, who manages Ora’s Amazon business, reports the brand aims to spend under 20% of its Amazon revenue on ads. “We run both [sponsored store and sponsored product ads], but prefer to do them for specific SKUs as each product has a unique and powerful story to tell and set of facts to educate customers about,” he says. He adds that Ora has been experimenting with DSP ads to capture interest around Prime Day and Black Friday/Cyber Monday. Overall, Bryers is very satisfied with Amazon Advertising. He says, “It’s been a great tool for us to increase brand and product awareness, and get in front of customers who might otherwise have never heard of Ora Organic, and we’ve been able to continue to grow profitably with it.”
• Industry veteran Kim Walls, CEO of luxury skincare specialist Furtuna, has run Amazon businesses for brands across the personal care spectrum. She recommends a brand invest 15% of Amazon sales into advertising on the platform if its goal is gaining new customers. “Advertising is essential if you’re trying to grow on Amazon or make sure to stay in front of customers who might not necessarily know what they want,” says Walls. “For advertising to work on Amazon, I believe that the people seeing the advertising need to have seen the brand before. There has to be some level of awareness already.” She recommends that brands use agencies to run their Amazon advertising efforts until they’re big enough to justify a full time in-house position. She explains, “There are many, many different specialties required to do well in Amazon, so I really strongly believe that that an agency is the best choice versus trying to do it in house unless you’re huge ($50 million in revenue).”
• Chad Annis, CEO of Amazon consultancy Market Defense, is able to see results with a smaller percentage of sales put toward advertising. On a recent webinar, he shared, “Depending upon the brands budget, we spend between 5% and 10% of a brand’s upline on a whole host of sponsored ads, pay-per-click banner ads. It depends on the brand. We have brands from overseas that aren’t well known on Amazon that do better with 90% of their spend on banner ads and sponsored ads, others that do 50/50 with pay-per-click.”

What return on advertising spend (ROAS) can companies expect? A recent Feedvisor survey of brands on Amazon revealed that nearly half of the brands register at least a 7X return on their Amazon advertising spend. Brands reported the best return from sponsored product ads, followed by sponsored brands, sponsored display and Amazon DSP. Nearly 60% of the brands surveyed said Amazon gave them the highest return on media spend, beating out Google and paid social. Kelley Martin, CMO of Skyn Iceland, said Amazon ads are “one of our highest ROI marketing investments this year.”

Amazon Versus Other Promotional Initiatives

Traditional retailers working with brands to raise awareness and drive sales offer promotional opportunities like gifts with purchase (GWP) and sampling or rewards programs. The cost of these programs can vary greatly based on the size of the retailer. Additionally, because retailers are buying inventory from a brand, they will demand a high margin, often 50% to 60%, if not more.

Let’s compare the costs on a hypothetical product with a retail price of $100.

Amazon Advertising Considerations

• Prestige. Though abating, there is still a stigma associated with selling premium and luxury beauty brands on Amazon. The platform’s new luxury beauty store is its latest initiative to bring in prestige brands usually only available at department stores or beauty specialty retailers, but widespread adoption by luxury brands remains to be seen.
• Legitimacy. Being vetted by and scoring a retail partnership with Sephora, Bluemercury, Ulta Beauty or other marquee retailers gives a brand a seal of approval that influences consumer and investor decisions. Groups inside and outside the industry trust the buying teams at established specialty retailers to choose the best brands in a very crowded beauty market.
• Expertise. When a brand enters premium retailers, it gains access to their internal team of experts that can act as de facto consultants on everything from sales forecasting to packaging to product development, providing brand development knowledge that emerging beauty and wellness companies could not otherwise afford.
• Brick-and-mortar. COVID has only accelerated the migration of beauty sales online. According to Digital Commerce 360, beauty retailers will grow online sales 54% over 2019 by the end of this year. Still, the tactile experience of shopping in-store will always be a critical piece of the beauty purchase journey. The ability to be discovered through in-store shopping is not available to brands carried on Amazon.
• Sampling. Beauty retailers have created robust sampling programs that allow consumers to discover new brands and products.

• Eyeballs. Hundreds of millions of them. Amazon boasts over 200 million unique monthly visitors and there are nearly 143 million Amazon Prime members. For emerging brands, capturing sales from only a fraction of 1% of Amazon shoppers can translate to game-changing revenue.
• Ad targeting. If brands comprehend how to navigate Amazon’s sometimes confusing ad options, the e-tailer offers them robust capabilities to target consumers through advertising.
• Rich data. Especially through its Demand Side Platform, Amazon offers detailed data on return on ad spend (ROAS) that isn’t rivaled by other online-only retailers.

Summary

Advertising has become a necessary investment for companies selling on Amazon, not only to drive sales but also as an effective tool to increase brand awareness and capture new consumers on the crowded platform. According to Comscore, 33% of skin care buyers that visit Amazon discover a new brand or product and for buyers who visit Amazon while in store, that audience increases to 40%.

Most brands are pleased with the return on their spend. For now, the cost of advertising on Amazon is more affordable than similar types of programs at other retailers and, even after robust ad spend, the net proceeds to brands selling on Amazon is higher than proceeds after selling through traditional retail partnerships.

Next Up In The Beauty On Amazon Series

We will share the results of Beauty Independent’s survey of independent beauty brands selling on Amazon.