Brands count the cost of selling on Amazon

Brands are finding that the costs of selling through Amazon are rising sharply, as they increasingly need to take out sponsored advertising as well as paying for transaction fees and fulfillment services.

Context

Given the importance of Amazon as both a search engine for consumers looking for products and a platform to buy those products, the idea of adding sponsored search items was an obvious step for the e-commerce giant to bring in more revenue. Ads were the fastest-growing part of Amazon’s business in Q2, almost doubling to $7.9bn.

What’s happening now, says CNBC, is that the number of sponsored ads is increasing and there may be as many as six in response to a search where there were previously only two or three. 

Why it matters

With fewer organic search results on the first page, brands are having to pay to maintain visibility and as demand grows that is becoming more expensive: the cost per click for Amazon search advertising has increased almost 50% in the past year, according to the Canopy Management agency.

Background 

• Keyword-based Sponsored Product ads account for around three quarters of Amazon’s ad revenue but their share is declining as formats like Sponsored Brands advertising grow quicker.
• The growth of Amazon aggregators, which are acquiring independent sellers, is adding to the upwards pressure on advertising costs.
• Amazon says the number of ads shown will depend on search terms and the device used.

Sourced from CNBC, WARC Data