Amazon is winning a growing share of CPG media dollars, and its September announcement that it would open an office in New York City to house a major expansion of its advertising platform business means the competition will only heat up. It comes as CPG brands pulling back on digital media undercut global agencies, marketing tech vendors and digital measurement companies.
AdExchanger looked at a few strategies Amazon is deploying to build its share of CPG budgets as some of the worlds biggest ad buyers reshape their approach media.
Affiliate Commerce
Amazon’s dominance in affiliate marketing isn’t new, said George Manas, president of the Omnicom performance marketing agency Resolution Media, but as more CPG products sell online, publishers and brands are sending a growing share of customers to Amazon.
Amazon further encourages this activity.
A standard affiliate network might pay five to 10 cents per click while Amazon offers 30-50 cents, said Shirley Chen, founder and CEO of content marketing platform Narrativ. “Amazon is winning because they give publishers more credit for user acquisition, while standard affiliates credit bottom-funnel channels like retargeting and Google search.”
Amazon’s conversion rate – the likelihood a shopper will actually buy the product – also outpaces other ecommerce sites, so affiliate traffic driven by commission preferences Amazon.
The biggest retailers are changing their affiliate programs to compete, like Walmart’s Jet.com upping its rates and courting premium publishers with direct deals, but that creates leaner margins for already strained retailers.
Chen said retail and ecommerce clients have been conquesting Amazon by upping their affiliate bids, adopting the ecommerce platform’s more aggressive acquisition tactics.
But once again this strategy means Amazon competitors are stretching their budgets to maintain customer share.
Amazon can also pay more for affiliate clicks because signing people to its Prime loyalty program adds immense value to that traffic, said Oliver Roup, founder and CEO of affiliate marketing tech company VigLink. “An advertiser with a long-term vision of a customer is going to be willing to spend more.”
Amazon declined to comment.
Product subscriptions
Speaking of long-term vision of a customer, Amazon’s dominance as a subscription revenue generator tees up the platform for a deluge of CPG budgets.
Clorox has stepped up its Amazon subscription efforts recently, advertising “Subscribe & Save” offers for home cleaning supplies that would normally be purchased in a grocery store or pharmacy, according to one brand manager.
“Name one other site or app where someone scrolling through a product feed might actually see a product, click and then be a subscriber,” the Clorox brand manager said. “It’s literally the only place on the US internet where that could happen.”
A major condom manufacturer this year began working directly with Amazon on subscription strategies when the brand can match certain traits, like conquesting regular store buyers of a rival brand or just people in the right age bracket (aka in college and mid-20s), to obtain a high customer lifetime value.
“We make more on a pack of condoms sold in a store,” said the brand manager, speaking anonymously due to a nondisclosure agreement with the ecommerce platform. “But if the potential long-term value is there, we’re looking to offer a subscription.”
A paper towel brand spiked Amazon search spending this year to generate subscriptions, despite lagging sign-ups so far, because the brand expects Amazon’s Alexa will favor subscribed-to products for voice-activated searches, which return fewer options than text queries.
Subscription-based startups are responsible for a 13% drop in the US market for Procter & Gamble’s Gillette brand, according to a report published last month by Trian Partners, a P&G stakeholder known for activist CPG investments.
“Dollar Shave Club (now Unilever) and Amazon are aggregating data on P&G’s consumers,” according to the Trian report.
P&G isn’t going to collaborate with Unilever’s Dollar Shave Club, but brand chief Marc Pritchard announced at Dmexco last month that the company is doing more direct marketing with Amazon “to use unique ID data to reach consumers closer to when they’re ready to buy,” even as P&G cuts tens of millions from digital advertising.
Transaction data
Amazon’s biggest CPG growth driver is its transactional data stream.
Other giants like Facebook and Google have an indirect view of consumer transactions. They rely on a third-party ecosystem of shopper data providers, like Nielsen Catalina Solutions and Datalogix, to connect digital media to in-store purchases. While this ecosystem provides scaled transaction data, it has disadvantages.
Google claims to obtain 70% of US credit and debit card transactions through deals with undisclosed partners, but the program has attracted privacy watchdog complaints and only provides a percentage of users served an online ad who made a purchase in a given attribution window.
Facebook has piloted metrics like in-store traffic, but CPGs “will put real heft behind investments they see driving store transactions,” the social network’s VP of global partnerships, Will Platt-Higgins, told AdExchanger.
Amazon’s ownership of its transactions and direct consumer connections means it can offer CPGs closed-loop targeting and attribution without margin-eating intermediaries or the same privacy burdens.
“Tracking online ads to ecommerce transactions is infinitely easier than finding out how much retail sales you’re driving,” said Deanna Bershad, VP of media and user acquisition at the CPG startup The Honest Co., at a Facebook performance marketing event in July.
Connecting to ecommerce sales is a key reason why Amazon’s live stream of Thursday night National Football League games can attract a fraction of TV’s audience but sell for $2 million to $3 million, compared to concurrent NBC or CBS commercials at around $600,000.
“Amazon is forcing its retail competitors to be more aggressive with their marketing,” one TV network executive told industry trade Broadcasting & Cable about NFL ads this year. The exec also said Amazon’s NFL entrance heightened interest from P&G.
