Physical Goods Advertisers are Making a Shift from Google to Amazon

First Published: November 09, 2018 By .

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85.8% of Alphabet’s revenue comes from ads. While the company recorded $33.7B in total revenues in Q3 2018, ads revenues hit $28.95B, increasing 20% year-over-year and setting the annualized ads revenues run-rate for the digital ads behemoth at $115B.

But the tide may be turning for Alphabet and Google, as anonymous sources from the ad world announce a big shift from Google to Amazon, according to a CNBC report.

It’s already happening, they say, with some of their clients selling physical goods online relocating their ad budgets from one platform to another. In some cases, more than 50% of the money allocated for online advertising goes straight to Amazon’s pocket. Because of the NDAs they have with their clients, these sources remain anonymous says the CNBC report.

This only further confirms older reports by Digiday according to which large global advertisers like L’Oréal and Phillips are moving money from Google to the marketplace.

This shift is naturally pertaining to brands and retailers selling physical products online, and which are increasingly grasping the importance of having an online presence on Amazon, with more than often higher Returns on Ad Spend on it as compared to their owned channels. The results are stunning, Amazon is emerging as the soon-to-be third largest digital ads player globally, being on track to generate over $10B a year from its ad business with an outstanding 122% yearly growth.

Amazon Ads Business is a Rare Threat to Digital Ads Giants

Alphabet is still going strong despite this rare threat.

Google Search has actually accelerated its ad revenue growth in the first half of 2018, and Alphabet continues to grow stronger than it was just a year ago. Even though we still haven’t heard from either of these companies’ representatives, industry experts might have some sense as to what’s going on.

It appears that what we have here is not so much a shift as it is a diversification of advertising options for niche brands. While part of consumer-packaged goods is now being marketed predominantly on Amazon, experts explain, big whales from the travel and automotive industries remain loyal to Google and its parent company, Alphabet.

An anonymous source from Google confirms this theory. In conversation with CNBC, the source revealed that “he’s not seeing clients shift search budgets to Amazon but is increasingly seeing clients come up with separate brands to see exclusively on Amazon”. The recent example of J. Crew setting up shop on Amazon with a new dedicated brand dubbed J. Crew Mercantile is a great example.

This is very much in tune with some other speculations about Amazon’s ambitions to build a retail cloud. “Amazon in the future will be an infrastructure for all retail supply chain steps”, according to Juozas Kaziukenas, who runs the e-commerce research Marketplace Pulse.

Undisclosed Google source did mention “concerned leadership”, but he also described this movement as “not a huge threat right now”.

Can Google Keep Up with Demands?

Whether Amazon poses a threat or not, the question is – can Google keep up with growing demands?

We’ve already seen some of their clients move from Google Search to explore YouTube and other advertising options under the platform’s umbrella. As for this giant’s invincibility, Facebook did beat the company before. Its undisputed reign in the realm of mobile advertising was short, that’s true, but sweet nonetheless. If anything else, Facebook proved that Google can be seriously challenged.

According to other sources, the biggest worry for Google-based advertising agencies is that its search has become “quaint”. Meanwhile, Amazon is constantly improving its user experience to meet the demands of both consumers and brands. A research from Survata shows about 49% of product searches start on Amazon.

To deliver the same seamless experience, the giant has introduced more than 15 years ago Google Shopping as a dedicated product search engine, and continues innovating in it. Google Shopping ads show in search results above or beside text-based ads and organic listings. Unlike text-based ads, they always carry a photo, price, and a description.

How can it be though that Amazon is increasingly beating Google in product search and advertising for physical products? Some people believe Google Shopping stopped being a product search engine and turned into a pay-to-play platform, increasingly losing on the opportunity to be the go-to place for organic products searches.

Amazon Converts in 90% of Cases

"Over 90 percent of searches for products that start on Amazon end with a purchase, even though that user may end up on social channels," said Chris Apostle, executive vice president and head of performance for North America at Havas Media.

Whether you’re running a brand or are a reseller, that’s some convincing reason to be on Amazon. Besides, the more money you invest in Amazon ads, the greater your chances for increased sales are, as this platform offers a number of engaging features in terms of reviews and content that help you get a flywheel rolling, hence ranking better organically.

All this, plus this remarkable shopping experience that the platform’s users get to enjoy, has contributed to Amazon being on pace to become the third largest digital advertising platform in the U.S., right behind Google and Facebook. The business, as they say, is booming.

It may be that Amazon needs not to steal clients from Google. It may be that the third runner-up is creating organic buzz simply by doing what it does best – providing a seamless shopping experience. Be it as it may, the advertising tides are slowly but steadily turning towards this formidable contender. At DataHawk, we're excited to be building the best analytics and automations software for brands and retailers selling on Amazon.

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