Amazon’s Ad Slots Are Becoming More Expensive
When searching for toothpaste on Amazon, the top products that show up are all advertised products from large companies with the “sponsored” label, such as Colgate and Crest. Consumers have to swipe two full pages on the Amazon mobile app to see unpaid products. Other than the search term, the number of sponsored products also depend on what types of device users are searching on, user’s browsing and purchasing history, etc. Amazon’s advertising revenue has been consistently growing in the past few years, rising from 850 million dollars in the first quarter of 2017 to 7.91 billion in the second quarter of 2021. According to an Amazon’s spokesperson, Amazon does not have dedicated ad slots, so the number of ads that users see within a specific search result varies.
According to the digital marketing agency Merkle, sponsored ads on Amazon accounted for around 73% of retailers’ advertising expenditures on Amazon in the second quarter of 2021. More and more product recommendations are being replaced with sponsored ad products on Amazon search results. The price of ads is also increasing. The cost per click was 1.27 dollars in August this year, which increased 86 cents from the previous year. Sellers are also paying higher prices for transaction fees and fulfillment services to Amazon.
Smaller sellers are facing intensified competition, as they do not have as much advertising budget as large companies, but if they do not pay for sponsored ads, their products will be at the very bottom of search results. Therefore, as ad prices are increasing, small sellers have to pay a larger percentage of their product price to sell their products on Amazon. In a sponsored search market, these small companies are the advertisers with lower bidding price, who might be able to get a ad slots, but the slots are definitely not as good as the ones being purchased by large companies with sufficient budgets.
Source: https://www.cnbc.com/2021/09/19/amazon-piles-ads-into-search-results-as-big-brands-pay-for-placement.html