March 26, 2019

What You Need to Know About Amazon's Ad Revenue

By Cassandra Shaffer / Amazon, Advertising

For the first time, Amazon reported more than $3 billion of advertising revenue for the fourth quarter of 2018. The ad business reached $3.38 billion in revenue, for a total of $10 billion for 2018, an increase of 95% from 2017.

New products and sellers continue to flood eCommerce marketplaces like Amazon. In fact, approximately 1.3 million products are added every day.  This inevitably leads to higher ad spends and increases the complexity of advertising.

This means that most advertisers can expect the cost of keywords (both branded and non-branded) to increase dramatically within the next 18 months. Advertisers can no longer waste time and budgets ‘figuring things out.’ Instead, they need to use automated, rules-based, algorithmic advertising methodologies to prevent falling behind your competitors.

Ad Revenue

At Pattern, we use automated advertising technology to do exactly this. Our technology helps find emerging trends, arbitrage opportunities, and pricing inefficiencies by using mathematical formulas. These formulas predict marketplace movements and automatically execute dynamic bid changes across hundreds of thousands of keywords across thousands of Child-ASIN level campaigns.

One way to better understand the process is to consider how high-frequency trading changed the stock market. The landscape went from people scouring opportunity to using complex algorithms to analyze markets and trigger the execution of orders when specific market conditions occur.

Algorithmic advertising is transforming the eCommerce landscape in the same way. What does this mean for marketers? And how does this apply to businesses who have just entered the market?

Garrett Bluhm is the VP of Product Development and Innovation at Pattern. “I think there needs to be some education around traditional bid management/manual campaign management and the limits that exist in doing it manually,” he says. “Clicking bids and making manual changes is extremely inefficient and is not addressing the dynamic market changes that are occurring on Amazon.”

Advertising has become a number’s game and marketers need to gather as much data as possible to support wise decision making and fiscally responsible execution. “A commonly missed opportunity of using data within the advertising realm is utilizing trajectory to understand whether or not you should be bidding on any keyword,” Bluhm says. “So much of advertising is wasted money on keywords that are either cannibalizing organic search or not converting. Measuring these effects and A/B testing via automated rule changes ultimately helps brands spend less money on advertising with a focus on driving only advertising that is fundamentally connected to genuine growth.”

We can expect advertising costs to continue to increase as marketers continue to throw money at the wrong keywords. While this may sound concerning, for those that are utilizing the growing data-set to make product-level scaling decisions there is significant opportunity. Unfortunately, it can be difficult to understand that data, which is why it’s well worth partnering with a company like Pattern so that we can assist you in drawing the insights needed to spot trends, inefficiencies, and opportunities. That way, you can maximize your advertising ROI.

Want to learn more about how you can make the most of this technology? Get in touch today to talk about your options.

More Resources
The Experts' Guide to Amazon Advertising Strategy
The Ultimate Guide to Amazon SEO
Amazon MPS Benchmark: Hiking Shoe Brands 2021
Accelerate Your Marketplace Presence—Mercado Libre