PPC

Amazon is on Google Product Listing Ads - Now What?

To the dismay of retailers everywhere, Amazon recently took a step deeper into the world of digital advertising. As indicated in iProspect’s Q4 Paid Search Trends report, Amazon has returned to Google Product Listing Ads (PLAs) for the first time since the platform transitioned from organic to paid search results in 2012. The online retail giant is already the top paid search advertiser in the world with a 35% share of the top 50,000 retail keywords. However, with PLA performance on the rise, it’s no longer enough for them to rely solely on text ads to drive revenue.

Our auction data insights across iProspect retail clients show that Amazon has a strong presence in most Google Shopping categories, including everything from apparel to home and garden. Anecdotal search query research indicates that – for now – Amazon seems to be focused on advertising lower margin products and items that are easier to ship, such as a kitchen mixer.

Concerns among Amazon’s retail competitors are ubiquitous and valid. To pretend this isn’t a matter for concern would be insensitive and ill advised. However, the situation might not be as dismal as it seems. There are strategies that retailers can implement proactively to lessen the blow, and there are also simple facts that should keep you from stressing out too much about going toe-to-toe with one of the world’s biggest household names.

The Problem

1. What will happen to my impressions shares and CPC? Whenever an enormous player like Amazon enters the market, it’s safe to assume that you’ll have to pay more if you want to maintain the same – or earn better – visibility. Across all of iProspect’s holiday performance data (which covers Amazon’s first appearance on PLA), we observed a 13% year-over-year (YoY) rise in CPCs and a consequent 4% YoY decrease in clicks. In addition, our big-box retail client has already taken a significant hit in impression share: a 16% YoY decrease since Amazon entered the PLA auction with the biggest declines in the home and garden and hardware categories – 62% and 37% YoY decreases respectively. Of course, it’s difficult to attribute these stats entirely to having Amazon as a direct competitor; but, given the timing, it’s hard to deny that the retail giant’s entry into the auction isn’t an important factor.

2. Can my brand compete with Amazon’s inventory and customer loyalty? Even though Amazon does have a huge catalog, the customer loyalty built via their incentive programs should be your biggest concern. Nearly half of American households are Amazon Prime members, a figure that has increased 35% since last year. Of these Prime members, 73% report that they are now shopping at Amazon more than they did when they first signed up for Prime. Google PLA currently doesn’t offer any program even remotely like Amazon Prime, providing little incentive for existing Prime customers to click on another retailer’s ad within PLA search results if an Amazon ad is present.

3. How aggressive will Amazon be on PLA? As previously mentioned, Amazon is already the top paid search advertiser in the world.  The question now is whether they have plans to conquer PLA in the same way? Their strategy depends on which KPIs and business goals they’re looking to target, both of which are unclear at this time.

The Solution

1. Google PLA is still Amazon’s competition. Amazon once vowed that no matter how much they could make on PLA, they would never take the bait for fear of giving their top adversary too much of their hard earned money. Though they obviously didn’t keep that promise, it still wouldn’t be their wisest strategy to put too much of their inventory – and, more importantly, budgets – into PLA. The more products that appear on the platform (where customers can easily and instantly compare Amazon prices to those of competing retailers), the less incentive consumers have to go straight to Amazon’s site. Not to mention, Amazon would be paying for traffic they might have had for free anyway, given the loyalty seen amongst Prime members and the fact that 44% of all product searches begin on Amazon.

2. Amazon’s exclusively online platform can’t establish a presence on LIA. Big-box retailers still rely heavily on the success of their brick-and-mortar stores, which is where LIA (Local Inventory Ads) can be a huge asset in the battle against Amazon PLA. While this ad type might not reap the instant gratification that PLA does, it can still be an effective tool for bringing customers to the store. Advertisers can rest easy knowing that Amazon will not be able to infiltrate this space.

3. PLA offers retailers an opportunity to capitalize on any pricing advantage. Though it’s not the easiest or most practical option to lower your prices, you can still work with existing PLA features to make your prices appear as competitive as possible. The sales price column is entirely optional, but including it in your data feed can help your product stand out as the better deal for shoppers.

So, even though the effects of Amazon entering the PLA auction have proven to be both very real and the driver of some rapid changes in the market, taking the time to optimize your data feeds, shopping campaigns, and presence on spheres not made available to Amazon has a strong potential to help your brand function at similar – or even better – PLA performance levels than it did before.