Amazon Advertising Juices Earnings, Fueled by Growth in PPC
Amazon’s massive fourth-quarter earnings were no surprise. The online giant outperformed industry-wide decline with a Covid-driven e-commerce surge. But recent surveys of Amazon sellers indicate there might be more going on under the surface.
A whopping 75% of third-party Amazon sellers are now using Amazon Pay-Per-Click (PPC) advertising to promote their products on the site, according to a survey by the all-in-one selling platform Jungle Scout. Those sellers are achieving some enviable results.
Forty-four percent of Amazon’s PPC sellers say they’re generating more than $10,000 in monthly sales, versus just 20% of non-PPC sellers.
PPC Amazon Advertising
PPC advertising has quickly become the most popular method used by Fulfillment by Amazon (FBA) sellers to market their products, with three-in-four Amazon sellers now using at least one form of Amazon PPC. Jungle Scout’s own surveys show that many sellers opt for multiple forms of Amazon PPC. Those gains are pushing Amazon as it edges closer to ad industry ad leaders Google and Facebook.
“Online shopping has exploded over the course of the Covid-19 pandemic, which has benefited Amazon and its sellers,” says Jungle Scout Chief Marketing Officer Michael Scheschuk. “It’s great to see that most sellers recognize this and are taking steps to boost their brand awareness through PPC ads.”
Of the 75% of sellers currently using Amazon PPC, 88% report using Sponsored Products, 43% report using Sponsored Brands, and 32% report using Sponsored Display. Looking at the 25% of Amazon sellers not running PPC ads, just a handful are advertising on Facebook and YouTube. Jungle Scout found that the top social media marketing platforms for Amazon sellers are Facebook, Instagram, Pinterest, TikTok, and YouTube, but the percentage of ad sellers’ spending on those sites is small.
“We found in our Q4 2020 survey of consumer behavior that though consumers reduced their spending during 2020, over a third increased their online spending, and 58% are shopping on Amazon more frequently than before the pandemic began. By Q3 of 2020, 70% of U.S. consumers had made a purchase on Amazon,” Scheschuk says.
A simple solution
Nearly one-in-five Amazon sellers (19%) chooses not to market their products, either online or offline. Scheschuk says that’s often the result of a lack of understanding about how Amazon advertising works or the misconception that PPC is too complicated to use.
“It’s true that there’s no one-size-fits-all approach to managing PPC—your ad strategy will depend on your marketing budget, product price, and the level of competition in your product niche,” he says. “It does take a bit of time to get the hang of optimizing your PPC spend. But there are tons of educational resources out there. And as we’ve seen from the profitability difference between PPC users and non-users, a PPC strategy is a must-have for sellers.”
Third-party sellers boost the e-commerce giant
Amazon’s earnings reached record numbers in the past year, despite rising unemployment rates and economic uncertainty. The company sold more than $10 billion worth of goods on Prime Day alone, which was up from $7 billion in 2019. Amazon also broke records during the holidays, with deliveries of more than 1.5 billion toys, home products, electronics, and personal care products.
Scheschuk says third-party sellers today generate more than half of Amazon’s yearly revenue, and small brands are behind many more of the product ads on and off Amazon than the average person might expect.
To compete, sellers would do well to consider PPC advertising and other marketing techniques.
“Even with [the] influx of Amazon customers, sellers can’t expect to stand out from the crowd without a marketing strategy,” Scheschuk says. “No matter how great their product is, they need more eyes on it—and that involves running PPC ads and using other marketing techniques, on and off Amazon.”
