Amazon's plans for its own ad network will have a huge impact on B2B marketers. How will you be able to use Amazon's data in your marketing efforts?
When Home Depot first hit the market, it was thought there would never again be another retail chain as great. The cost of retail was getting too high, and online was creeping in. Now, Amazon is the next great retailer, and they're about to take the industry to a whole new level.
Amazon has announced a release of its own ad network. The short game is for online retailers to better sell their products, but that is the very short (and small) game. The real win here for Amazon is in the potential revenue from the data they'll collect as you shop - and as a B2B marketer, you should have a solid understanding of what this means for you, and how you can leverage this data in the future.
When retargeting hit the scene, it changed the game for retailers by drastically increasing conversions. The theory is simple: target the ad to people who have shown interest. The theory worked, and now companies like AdRoll and Retargeter are raking in the revenue. However, retargeting has one major issue: you have to get the person to visit the right site before you can re-market to them.
Now imagine, instead of retargeting, you can pre-target. You might say, well, isn't that just an advertising list? Well, it's not a just a list, but rather a list generated by an algorithm that's already predicted which people are the most likely to be open to evaluating your product - based on a massive history of personal behaviors and activities.
This list can use all the power of Amazon's data and technology to give you a superior list. As David Hirsh, a Google veteran, stated in his interview with Direct Marketing News, "In the early days of Google, people said Google's really great at consideration of the purchase intent. But there are very implicit data points that Amazon might be better at. They have this greater breadth of personalization and levers. I look at it as the next wave of discovery - not people searching for things, but introducing people to things."
There's a line of thought that Amazon is a consumer-based company, so therefore the ad network they build will be consumer-focused. This is true to a point, but let's break down the numbers. A consumer sale has a 5 percent margin, where an advertisement has profit margin that's four times higher. So, the money is in their advertising products, not their retail business.
In fact, this may become Amazon's main revenue-driver. In 2013, Amazon brought in $74 billion on retail sales, where Google brought in $50 billion from ad revenue alone. Knowing how you buy, why you buy, and insights around what you're going to be open to next and when is more profitable for Amazon than simply being the place to buy. The place to buy almost becomes the loss leader, but the insights gained can be used by anyone wanting greater transparency into the preferences of consumers.
Furthermore, consider Amazon's ability to take action on the transparency they have. Currently, Amazon uses its own data to increase conversions on their site. A quote from Amazon's 2013 annual report states, "Conversions are our key metric." So leveraging the data and insights Amazon is able to provide will easily help any company's conversions as well, regardless of B2B or B2C. It's all a game of conversions, and Amazon is currently one of the best in the game at it.
Data is key, and the data Amazon owns can provide a whole new level of understanding. This data will soon be available to other companies - and can be combined with other data sets to provide previously unimaginable levels of targeting.
The argument is simple: as Google pay-per-click (PPC) advertising grows, so do its costs. Google PPC advertising costs for major keywords are on a trajectory that will soon reach its zenith. The zenith will be the point where the lead costs are equal to the revenue generated from the lead. On the road to this point, other advertising options are going to come about, and the Amazon ad network is one of those networks. It is an alternative to Google PPC, allowing for more pre-targeting efforts (rather than point-of-sale efforts), new data sets, and sites that will only allow for Amazon ads.
Amazon's ad network for B2B will be a thing, but not tomorrow. There are a few things standing in its way. First is the network. They are rolling this out to their Amazon Associates, or sites that are currently receiving commission on retail sales via their website. The new ad network is replacing this with a CPM model on select sites. This means for B2B companies, the sites will probably not be ideal, and the CPM model will probably not be as targeted as most B2B companies would like. However, I'd expect the ad network to advance quickly. Over the next few years, I'd expect to see cost-per-action metrics come about, and more sites gaining the network, opening up the viability for B2B advertisements on Amazon.
The other question is, will display ads be too expensive or will other channels provide better conversions? I'm not exactly sure yet, as it will take some testing for companies to figure this out. I think that, regardless, the data will provide a significant level of insight for certain businesses and will make this a major advertising channel for some - just maybe not all.
In short, it is going to be a thing, just not tomorrow. So keep your ears open for updates on the network, begin to think about how you use can use Amazon data, and have some budget ready to test out new ideas. When it does become viable for B2B, you'll be ready to roll out amazing new campaigns before your competition even hears about it. Just remember, everything changes, so make sure you're aware of what's new, and how you can use it.
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Mathew is the head of thought leadership for B2B marketing at Pardot, a Salesforce.com Company. A consummate writer, he has been featured in numerous publications such as Marketing Automation Times, DemandGen Report, Marketing Sherpa, ZDNet, and is the author of Marketing Automation for Dummies (published by Wiley February 2014). As a speaker Mathew speaks around the world at events such as Conversion Conference, Dreamforce, SugarCon, and to companies including Microsoft, Investec, NetJets, and Restaurants.com, to name a few.
Hong Kong, May 5-6, 2015
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