Entrepreneurs

Council Post: Why The Amazon Ad Business Is Skyrocketing Right Now

By Greg Mercer, Founder and CEO of Jungle Scout, the leading all-in-one platform for selling on Amazon.

With the influx of sellers and brands on Amazon, competition on Amazon is steep. But effective advertising can help these sellers and brands set themselves apart. Ad revenue is now Amazon’s fastest-growing sector—surpassing its subscription services, which include Prime. According to my company’s 2021 Amazon Advertising Report (registration required), Amazon is expected to make more than $26 billion in revenue by the end of 2021.

I’m the Founder and CEO of an all-in-one platform for selling on Amazon. As a seller myself, I recognize that advertising on Amazon is challenging and complex; it’s an integral part of selling on Amazon that deserves its own focus for both sellers and brands. There’s a growing industry devoted to helping sellers navigate advertising on Amazon, and here’s why it’s taking off.

Insights for advertising on Amazon are in high demand.

In 2020, Amazon claimed 10.3% of the U.S. digital ad space, up from 7.8% in 2019.

Because ads significantly influence consumer decision-making, sellers want to get the most mileage for their money and insights that could change the trajectory of their businesses.

According to our research, 56% of U.S. consumers say that if they could only shop at one store, it would be Amazon. Optimizing ads to attract these shoppers requires best-in-class insights and automation, saving you time and earning you more sales. 

Advertising can thrive as a standalone offering.

Because of the demand for advertising insights on Amazon (and advertising’s complexity as a subject matter), companies can create ad analytic platforms that thrive as a standalone offering.

We also found that 75% of sellers on Amazon use at least one type of pay-per-click (PPC) advertising. With nearly 2 million active sellers and thousands of big brands on Amazon, that’s a colossal window of opportunity! 

Other platforms don’t have sophisticated insights for advertising campaigns and lack the technology to support sellers with advertising. This gap in the market has created space for advertising companies to build new ad software for this specific purpose.

Advertising is an obstacle for sellers.

Understanding ads is a major pain point for entrepreneurs and brands. If ads are “gateways” to conversions, sellers are limiting their product’s growth potential because they don’t know the best way to maximize these gateways. Mismanaged ad budgets lead to stunted sales.

Advertising solutions allow sellers to get the color and nuance of how ads are working — and sellers want better context for PPC ads for their products to thrive. According to our research, 34% of Amazon sellers said they plan to spend more on advertising this year than in past years.

And as more sellers flock to Amazon, these solutions give sellers pivotal insights and powerful automation so they can continue to optimize their performance on Amazon, like options for reporting, competitor insights, custom dashboards, forecasting and more.

Brands need help assimilating to Amazon.

As brands transition from physical stores to online marketplaces, they need to understand how products are presented on Amazon — and some are in the dark. Many don’t even know how powerful Amazon can be (or are even skeptical of it). But with a majority of U.S. consumers starting their product searches on Amazon, brands will be left behind if they don’t embrace Amazon’s influence. 

These enterprises need to understand the Amazon channel at large, their positioning in the marketplace and how to increase their share of voice — all of which advertising plays a key role. 

Because of the sheer volume of data points and ready-to-buy shoppers on Amazon, brands are now faced with critical questions: Which of my products will be a success on Amazon? Where should my ad spend go? With Amazon advertising platforms, brands can see exactly how ads contribute to their sales and overall financial performance with greater customization and detail.

Bottom line: Advertising is an essential part of success on Amazon. As competition continues to heat up, sellers and brands will seek out better insights and avenues for maximizing campaigns, contributing to the boom of the Amazon ad business.

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