Moz’s Brian Childs sat down with our CEO Connor Folley to talk about the opportunity around Amazon advertising at large. Specifically, Amazon as an equalizer for brands.

Unlike physical shelves at a store, brands enjoy practically unlimited space on e-retailers like Amazon, giving more brands an opportunity to get more products in front of shoppers. Smaller and newer brands are taking advantage of advertising opportunities to get in front of shoppers who are looking to buy - and brand agnostic consumers are rewarding them greatly. Connor shares how smaller brands, or share challengers, can strategically take on share leaders in their respective categories.

But of course, that’s not all. Brian and Connor covered so much more, from the role of Amazon as the relative newcomer in the digital marketing space, to the role each ad unit plays, to the expected growth of the platform in the coming years.

A podcast version of the interview below is available on MozPod. The following transcript was lightly edited for clarity.

Note: At the time of recording, Amazon Advertising had not yet launched as a unified name under which all suppliers marketed on Amazon. Instead, self-serve advertising on Amazon was done either through Amazon Marketing Services (AMS) or Seller Central. Below you’ll see reference to AMS. While the name has changed, the way search advertising works and the strategies shared below remain relevant.


Brian Childs:Hey Everyone, welcome to another episode of MozPod, the podcast for SEO, brought to you by Moz Academy. I’m your host, Brian Childs.

This is one of those discussions that just give you a little glimpse into the future. Our guest today is Connor Folley of Downstream, a technology company based here in Seattle, and if you’re a regular MozPod listener, which I’m sure you all are, you know that Connor was a guest on the Pod a few months back, where he helped us understand how Amazon’s rank engine works and eCommerce generally.

Today we’re going to be talking about another part of the Amazon ecosystem, which is AMS. You might not be familiar with what AMS is but I promise you will be. AMS is Amazon Marketing Services, which is Amazon’s ad engine. Think of it like AdWords but for the Amazon platform. Downstream does a lot of things related to Amazon but in this discussion we’re going to be dissecting all things AMS; what it is, how it works, where it’s going and I’ll tell you what: it is going. It is big now but the numbers that Connor mentions in terms of expected growth are just, Wow!

If it’s any indication about where Amazon is headed with this platform, Connor’s company just got picked up by Techstars. So people are interested in this and you should be too.

I can understand you might be listening to this and thinking “I thought MozPod was about SEO” and that is true, however the change and growth in ecommerce SEO and its adjacencies in paid ads is a really fascinating corner of the landscape. In fact, Connor says something early on in this discussion about the beauty of a platform like Amazon and it’s very clear attribution to purchases, like everything ends in a ‘Buy’ button and you can clearly see it on Amazon.

When it comes to SEO, where we’re part of a sales funnel that leads to purchases or business value creation, it’s good to understand the place where SEO fits; where it plays a role, and what happens downstream from those strategies to move people towards creating value for your business. Connor does a great job of breaking down the nuances of how AMS works so definitely study this one. Keep an eye out for his company and think about how paid channels like this fit into your company’s strategy or the strategies for your clients.

Let’s go ahead and jump into the conversation now recorded here in the intergalactic Moz headquarters in Seattle with Connor Folley of Downstream, where we talk about AMS.

Hey Connor. Thanks again for jumping on MozPod. Really looking forward to this discussion today about AMS.

Connor Folley: Thanks for having me, Brian. Happy to be here.

Awesome. Let’s start out with just discussing, let’s define this acronym, three letter acronyms (everyone loves them) what does AMS mean?

Absolutely. AMS is Amazon Marketing Services, and that is Amazon’s search advertising platform. It’s comprised of three distinct advertising units; Sponsored Products, Headline Search and Product Display.

Almost all of the units are search targeted on a keyword basis. Product Display being the one outlier that is targeted on a sku by sku or browse node level. Everything else (Headline Search and Sponsored Products) are really focused on being keyword targeted.

Sponsored Products is probably the most well known of the AMS units. They show up very organically within Amazon Search. The only call out is the little ‘Sponsored’ tag up in the window, up in the left-hand corner of the window. And then Headline Search: big graphical banner across the top, about 50 characters of copy, little bit of creative there and then those Product Display ads I mentioned previously, those are on the Product Detail Pages in the lower right hand corner.

Is AMS the Amazon version of Google AdWords? I’m just buying various types of advertisements that would show up within the Amazon search functions.

Yes, I would say that is accurate. There is definitely some variation between the two just because Google, being a search engine, and Amazon, being a dynamic eCommerce marketplace. Many different considerations that have to be taken into account and how you approach both of them but essentially, yes.

Google Ads is kind of a big business, as far as I understand. I think it was, $80 billion, or approaching $80 billion, or something like that, in 2017 or $78, $79. I can’t remember where it ended up. But what does Amazon Marketing Services look like in terms of size comparison to what people are familiar with; Google Ads?

Great question. Google is about $73 billion estimated in 2017.

Oh, okay.

AMS, their total ad revenue for 2017 estimated to be about $2.8 billion. However, that’s pretty significant growth over 2016. But JP Morgan projects that in 2019, that revenue will be up to $6.6 billion, so up 136%. And recently, Citi estimated that this is going to explode over the next decade into a $50.6 billion in revenue.

Significant increase is projected for AMS over the next several years and longer term. And that’s for a variety of reasons;

1) most importantly, Amazon is the top destination for product search; if you’re looking to spend your ad dollar, that’s where customers are going to research products.

2) Amazon is unique from other digital advertising, and traditional advertising, for that matter, in that it all ties back to a ‘Buy Box’. You have attributed sales within your advertising reporting, which is really compelling.

And then, 3) which I think is one of the less known drivers behind this is because Amazon is both a brand and a retail platform, their advertising is able to access really two buckets of funding. One being the traditional brand advertising bucket that Google and Facebook pull from but then there’s also that trade or shopper bucket of funding that’s generally managed by the sales force and you see executed in the form of end caps at retail or shelving face-outs. Many brands now view how you are search marketed on Amazon, just like traditional planogramming on a physical shelf. That roughly doubles the available revenue size for Amazon advertising, which is really a sea change when it comes to digital marketing.

Those growth figures you mentioned (record Black Friday sales last year, online retail just exploding), it seems like the spend for these advertising services is outspending some of those growth numbers. Is there a high degree of correlation between just general shopper behaviors moving towards online purchases versus the ad spend that goes along with it? Is that where these projections are coming from? To set expectations there, because it seems like the growth rates are outpacing people’s move towards online retail.

Great question. I would say that ecommerce marketing is really a nascent segment and it’s only beginning to catch up to the available sales revenue there and that’s for a few reasons.

One being that AMS was only launched a few years ago and initially it was a credit card only platform. There wasn’t invoicing available. You could imagine if you were somebody like a Unilever or P&G looking to advertise on the platform just having to burn through credit cards all day. That’s a really difficult proposition. It took Amazon some time to finally roll out invoicing on the platform.

Two, there’s just a total absence of tools to manage your investment on AMS. Google AdWords has, until now, not existed to manage your investment on the platform and because of the dynamics of an ecommerce marketplace, it’s really challenging to manage at scale. You think about the size of some of these brand’s catalogs in the thousands versus on Google you have a few URLs you’re trying to manage. Also, on Google, your URLs are basically static. On Amazon, you’ve got competitive price matching to all the other retailers. These are just fluid, changing by the second, all day long. You’ve got third parties listing and competing for your ‘Buy Box’ on the platform. You have profitability constraints. You’ve got inventory, etc. Whole variety of different inputs and takes that you don’t have to factor in with traditional search or social advertising. A much more complex and dynamic advertising marketplace and for that reason, the investment has somewhat lagged.

Barriers to entry (in terms of things that you mentioned with invoicing) but there is a lot of opportunity for people to overcome and there’s some efficiency gains. Then there’s companies like yours that make it a lot easier, that you help businesses translate their ambition into actual action on those platforms.

That’s right. At Downstream, we provide an AI-powered Amazon marketing suite that really empowers those consumer brands to own share of voice, maximize ROI and scalably grow their Amazon search marketing investments.

I would certainly agree with the growth of this platform and some of the late adopters, it has provided an incredible opportunity for upstart brands to be able to grow share against more established share leaders in the space. That’s presented a whole host of new, and encouraged a whole host of new upstart brands to come onto the platform looking to supplant the more established CPG brands and CE brands that we’ve all become accustomed to.

Beyond just the search opportunity, Amazon in itself presents a unique opportunity there because the brand equity calculation that you would have in brick and mortar is just fundamentally different on Amazon. Look at an established CPG brand competing against and upstart CPG brand; the brand equity doesn’t translate the same on Amazon because that competitive upstart brand can have 5,000 product reviews and a ‘Best Seller’ flag and the customer is just as comfortable buying that product as they would be that legacy household name that is generally going to be at a higher price point.

Really interesting. You use these terms, and just for the sake of our listeners, I think it’s good to always point out any of our acronyms but Consumer Packaged Goods, we’re talking about Consumer Packaged Goods when we say the CPG.

When you use these terms share leader versus share challenger, I think for the remainder of the interview here we can talk about different competitive strategies between these two types of companies without using specific names. When we think about a share leader or a share challenger, is there sort of a classic example of where you see this happening on Amazon? You have this established business and you have this challenger; where are places where this is taking place a lot or is it just prolific across the whole platform?

Good question and thank you for reigning me in on the acronyms there. If you let me loose, it’s going to get really confusing!

I think across the Amazon platform, you have the dynamic of share challengers trying to take the position of these share leaders. I look at it a little like investing in emerging markets. If you’re able to over index early on as Amazon grows to be a larger and larger share of the overall retail pie, then you eventually become the larger brand. What we talk about when we’re referencing the share leaders in any given category, that is just simply by units and dollars the brand that has the majority of the market share and transactions.

You’ll find that in many of these categories, the share challengers will come in looking to gain share of voice specifically within search, and the ways that they will do this will be to compete on those core non-branded terms. If I’m an upstart shampoo brand, I’m going to be going after terms like shampoo; non-branded terms that drive the bulk of the search frequency. However, I am not going to benefit from the same branded term frequency that a share leader might get so I’m not going to get searches for Pantene and Head & Shoulders. That’s where that share challenger is going to come in and start to conquest on your branded terms.

Amazon is unique in the volume of actual non-branded search they get. Part of this is that it’s been a bit of a cultural change; millennials and younger shoppers are just a little bit more brand agnostic, which presents an opportunity.

Also on Amazon, you’ve got so much search concentrated in the head (the top 3-5 keywords) and then from there, Amazon customers are very comfortable using that dynamic left navigation to winnow down their search saying “I wanted to look at 4 stars, I want to look at Prime only. I want to look at these specific brands between these price points.” That search is a starting point and then from there, you winnow down the field, which creates a very competitive environment for a couple of head keywords that are driving the bulk of the volume.

It’s really interesting to imagine what the sort of role of brand or the measurement of that brand in the customer experience is in this new environment. The weight of what that is conceptually versus the way it actually translates into sales (maybe I have brand recognition with a particular product) but, at the end of the day, I care about things that are quality. Maybe I can attribute quality to the name but what is the better metric of quality?

It’s interesting, from these share challengers perspective. Let’s say we’re a shampoo brand: what do I have to do to try and make an effective wedge into those non-branded terms? Is it really just going after reviews and like high touch and having some different kind of experience or I am just at the whim of whatever unique thing that I come up with? Or is there specific things that challengers have to do to do this effectively?

That’s a very good question. As with anything on Amazon, it comes down to very first, you just want to make sure that you are nailing the basics. That would be good content, ratings and reviews, and then ensuring that you are in stock. With search on Amazon, if you are out of stock, it is like a light switch; you are either off or you are on. You’re simply just not going to get any share of voice, that means you’re not going to get glance views or detail page impressions, so that’s not going to register as demand in Amazon’s system. You’re not going to subsequent POs, so then you’re not going to be in stock and it’s just that negative feedback loop.

First off, nail the basics.

And then, if you are that share challenger, you have to find efficient ways to be able to compete against these big guys who, as we say, have those ‘death star’ budgets. They’re going in there and just trying to dominate share of voice, own all of those positions above the fold to effectively block you out. You have to find efficient ways to begin gaining share of voice within search, and that often comes down to having better tools. The tools available to those who are managing search on Amazon, as we’ve stated previously, there is not much available right now. Being able to leverage those tools to gain greater efficiencies and more clicks for your advertising dollar is going to be a distinct competitive advantage on the platform.

I think too much focus is often given to tail keywords, because aside from a few consumer electronics categories, most of the search is really concentrated in the head so you have to go in there and find reach where you can.

Can you talk about that a little bit more? What do you mean by the head versus the tail for people who may not be familiar with those concepts. If they’re looking at the screen or typing in things, what does that mean?

One anecdote that I’ve heard quoted to me previously that I think is pretty compelling is that the top three searched terms for light bulb make up more revenue than the entire tail. If you’re not competing for those, everything else is just breadcrumbs.

You need to ensure that you first identify what those keywords are, make sure that your content is optimized in such a way that you are available to surface. The calculation within AMS is a little bit different than it is in traditional search. For Amazon organic search, your title is incredibly important.

Additionally, having customers who have made that query previously clicked and converted on your product is also essential. Know those keywords. Know who your competition is, and then find efficient tactics to be able to go out and compete against them.

Leveraging capabilities like day parting so that you are not fighting against the entire competitive set for that keyword for the first couple of hours of the day when your competitive set is so much larger than it would be at the end of the day when everyone’s daily budgets are expiring.

Those sorts of opportunities, looking for uncovered, competitive keyword can also be a strong tactic, though you have to be careful with it. Often times, it can just create fights, where the only person who wins is Amazon.

I think it’s about having stronger tools so that you can find efficiencies, understanding where the head lies and where those top keywords are and not getting distracted by some magical list that has thousands of elaborate tail keywords and really focusing on gaining share of voice on those.

Interesting. If we use this head keyword example and I’m searching for a term on Amazon, let’s say electric toothbrushes. There’s Sonicare; people know it, tons of stars, tons of people that have purchased this thing and probably reviewed it at some point in time. Is what gets surfaced a lot of those same product but just from different vendors? Or is there an effort to try to like actively push different vendors in there to give a bit more of an opportunity for different vendors?

I think about it with traditional search, where I’m going to search for a J.Crew shirt. J.Crew might be the top three to five results but it’s not the top 500 results, even though they probably could field 500 different pages of J.Crew stuff into the search result. Is there an effort to put different vendors in there, just to give a little bit more mix for the same products?

That’s a great question and definitely one that I’m intimately familiar with that has a lot of interesting dynamics to it. When it comes to sponsored, first of all, you’ve got to be playing and investing to be able to even be available to surface. But specifically, when you talk about electric toothbrushes, there’s some really interesting dynamics that play there because not only do you have competitors like Oral-B or WaterPik, who might be trying to gain those placements, but then you also have all of these third party generic replacement toothbrush head competitors out there.

Right, right.

That competitive set is enormous. You’ve got these generic manufacturers from Guangzhou, China; hundreds of different third party sellers try to sell on the platform.

Trying to differentiate customer intent there and what you surface is a challenging exercise. What Amazon is going to surface to you on that specific query, within organic search, it’s largely going to be based upon click activity and the past. We’ve talk in prior episodes about the fact that that’s the most prevalent signal within search. Having those ASINs, or Amazon SKUs, that are receiving the highest volume of clicks are generally going to be the ones that surface up top.

Within SEO, on a term like Sonicare, you’re going to see that most of them are for Philips Sonicare electric toothbrushes. However, within sponsored search, you’re going to see there are quite a few competitors; from the Oral-B’s of the world to the competitive third party replacement toothbrush head manufacturers. You want to try and find as much efficiency as possible in there. It’s very challenging with all of those generics out there because there’s so many of these third party sellers that their budgets are going to be remaining throughout the day, because you’re dealing with a tremendous volume of competitors. Your CPCs really aren’t going to deviate as much as you progress throughout the day because it’s just a huge competitive set.

What if we just take a few moments here and then we can wrap up but let’s talk about the share leader then in terms of maintaining their share. It sounds like mainly it’s a ‘don’t put everything on the horses that run in the morning time’? It sounds like the time of day is something? Are people making the mistake, they’re spending budgets too quickly or what are some rookie mistakes that big brands make when they try to play in this space?

That’s another really good question. I would say it is about not having the right tool sets and oftentimes brands investing in AMS just don’t realize what it is that the competitors are using on the platform and that they are at that distinct competitive advantage. If someone is in there dayparting or using some other methodologies programmatically, they just have the opportunity to get so many more clicks for their advertising dollar.

Most brands are using the Amazon UI to manage their search, whereas Amazon advertising exposes an API to a select set of beta partners and those who are plugged into it have the opportunity to not only read data but to write it back. They can control those advertising placements and their bids programmatically throughout the day. You’re working against a computer there, which is generally like bringing a knife to a gunfight.

One kind of unique dynamic with the share leader position is that if you were to come in and just be kind of dominating share of voice for a particular keyword, meaning you owned headline search, you owned the two or three Sponsored Products above the fold. That can create a bit of a fortress mentality, which I would always recommend trying to maintain that because it appears to any share challenger trying to come in on a particular term as though there’s no way that this is going to give me a positive return on my ad spend. Every time I try and compete here, I’m upside down. Trying to maintain that, not having a budget outage because I’ve seen that time and time again where you were owning share of voice on a term like electric razor and then you dial your budget back, you allow another brand to come in there and get a taste and with the sales attribution that Amazon has. It can be pretty compelling and now you’ve got a problem.

That’s so interesting. I can just imagine looking at the data and saying like “well, we’re good there” so we obviously don’t need to. It’s like you have to man the castle; make sure you still have people there or they might find themselves in a position to just seek out a little bit and then who knows what will happen.

Considering that Amazon is the number one destination for product search, 64% of clicks are on the first three products. You have the lion share of product search available to you, and those first three slots get the bulk of the clicks. It’s all available to you via AMS. If you’ve got the opportunity to own that and you’re investing in that, keep it.

Great advice. Connor, thanks a lot for another great discussion here on MozPod. Thanks for coming in, hope we can have you back again soon.

Thanks, Brian. It was a pleasure.

Cheers.


For more on Amazon Sponsored Ads, and what makes Amazon marketing unique, and tips and tricks to finding the right keywords, check out this MozPod episode with our CEO Connor Folley.

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