Adland – It’s not just retailers, you need to wake up to Amazon too

While retailers are quaking at the coming invasion of Amazon, it will also be the new 800-pound advertising gorilla no one will be able to ignore, argues Mediacom's Roger Dunn.

Amazon has been making the headlines for months now, with the scale of destruction they will wreak on Australian retail already reaching mythic proportions.

However, while its e-commerce prowess is well known, little has been mentioned about their advertising business and the potential disruption it will cause – not least to the agency business.

Although Amazon doesn’t officially break out the ad revenue, eMarketer predicts they should pull in just over $1 billion in online ad revenue in 2017, an increase of 9.4% year on year, in comparison to approximately $34 billion for Google and $15 billion for Facebook.

Amazon therefore has some way to go, but clearly has the potential to become a third powerful player to join the existing tech duopoly. In contrast to the potential for fake news on Facebook, or unsavoury videos on YouTube, Amazon is also brand safe: there’s little to no risk of being positioned next to questionable user generated content.

It famously keeps Sir Martin Sorrell up at night and for good reason, with dominant positions in search and social already taken, a third walled garden around retail is a valid concern for anyone looking to sell their wares – and the agencies tasked to help them succeed.

However, I believe the launch of the broad new ecosystem Amazon will offer presents agencies with a huge opportunity to add value and broaden their scope.

Amazon’s Aussie home

Amazon has offered targeted ads around their search results and display ads for some time now, but they have quietly been pulling together all the elements to create a complete advertising solution. Amazon has a gold mine of customer intent data, garnered from a universal customer login that provides cross-device insight across the entire customer journey.

Reportedly their spend on video content is second only to Netflix, and along with their ‘subscribe with Amazon’ marketplace, they will have a good idea what media a shopper consumes prior to purchasing. The holy grail for advertisers has been to understand the impact of each touchpoint on the sale – Amazon could be the business to crack this attribution puzzle, and sell relevant ads at each point.

Amazon’s spend on video content is second only to Netflix

Amazon currently has a slew of marketing options such as coupons, add-to-wishlist embedded buttons, and even outdoor ad space on its shipping boxes and pick-up locations.

The giant also operates its own demand-side platform (DSP) and allows larger vendors to use self-service functionality to buy ads on sites across the web through ad exchanges managed by firms like AppNexus and Google. Some of those solutions would be relevant to brands that don’t even sell on Amazon.

Brands and agencies have had time to evolve with Facebook and Google, but Amazon is going to launch as fully fledged hive of opportunity – immediately a whole host of new content will be required, data analysis completed, and yet another adtech platform to log into and manage alongside all the other existing platforms: AdWords, Facebook, DMP, DSP etc. Fragmentation creates opportunity, and as complexity increases, businesses naturally look to external agencies to simplify things, and for someone to hold accountable.

In a similar way to Google and Facebook, Amazon will also be looking to develop direct relationships with brands. This isn’t a bad thing, but as we’ve seen recently with brand safety, fake news and measurement issues, it pays to have third party measurement. I mean this both from a technology perspective, through the use of viewability vendors like Moat, but also (and more relevant in this case) by having a third party, such as an agency, actively involved.

Clearly, Amazon will sell the benefits of their platform, so an independent agency perspective will be more valuable than ever – where does Amazon activity fit in, how does the ROI compare to other channels, and how does it stack up to other e-commerce opportunities such as eBay or Alibaba?

Amazon itself may not look to actively court agencies, but it will be essential to pull all elements of e-commerce activity into an overall strategic approach – from channel and media planning, through content development and optimisation, to measurement and reporting – all this means agencies will be more valuable than ever.

Amazon is sitting on a goldmine of data, this needs to be analysed and leveraged in its own right, but it will be important to make sure the insights here are also driving the planning process further up the customer journey – an agency will need to be hands-on with the platform in order to leverage this fully across the rest of the activity they manage.

As Amazon gets more competitive, so must the communication strategies deployed to win. Yes, brands can take activity in-house if they have the scale and expertise to run their own activity effectively. However, with new platforms and opportunities like Amazon, this represents an even great risk than more established channels.

Agencies will develop cross functional teams to build out the right capabilities – both inside the agency and within holding groups, as we’ve seen recently with our sister agency Mindshare and Possible. This will allow brands to leverage cross-category experience and leverage existing expertise in SEO, biddable media and programmatic.

Google’s opportunities in SEO and search marketing are familiar to many, but even these well-established specialisms are difficult to keep up with if you don’t have the time and pooled knowledge that an agency culture can generate. Google apparently gets one three-billionth more insightful with each search, and Amazon’s algorithmically driven business is likely to be no different, meaning the landscape and ad opportunities will evolve quickly.

In fact, according to a recent US study, 55% of online shoppers start their product searches on Amazon, so no doubt a cottage industry of specialists and consultants will setup shop to capitalise. However, the more nimble nature of agency businesses will mean they can also quickly pivot and align existing resources to adapt.

As Scott Galloway points out, Amazon is even a threat to brands themselves. As shoppers move to voice search via Alexa, most of the branding cues are removed – no packaging, no logos, no price even. Brands will need external perspectives, strategies and technology expertise from agencies to evolve from traditional brand building and adapt to this new operating system.

The founder of modern management, Peter Drucker, is credited with saying: “The only skill that will be important in the 21st century is the skill of learning new skills. Everything else will become obsolete.” Once Amazon arrives, this sentiment will be more important than ever – with agencies in the best spot to do just that, evolve and differentiate their services.

The aggregated media spend agencies manage can still open doors to access first to market opportunities, senior talent and beneficial terms for advertisers, but good agencies don’t differentiate by buying cheaper any more – anyone can buy cheap, non-brand safe or fraudulent media.

Real differentiation is driven by specialist capabilities, smart investment management, strategic leadership and the experience aggregated across multiple accounts. Agencies can offer all of these things, allowing them add considerable value as they help brands navigate the Amazon ecosystem – the new 800-pound advertising gorilla no one will be able to ignore.

Roger Dunn is head of digital and eCommerce at Mediacom.


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