Recode: Amazon saturates search, product pages with ads, and brands are buying in

Dive Brief:

Amazon's product and search result pages are increasingly saturated with sponsored ads, Recode found after running what it called an unscientific test of the service.
Sponsored ads, where vendors bid to have their products featured higher when consumers search for a related product, appeared on searches using both vague and highly specific terms. The feature appears to be helping big marketers hold their leads — Kellogg has a heavy presence when searching "cereal," for example — and newer companies become more visible.
In May, about 8% of the views on Amazon product pages came from sponsored links, more than double the previous year, per data from Jumpshot included in the analysis. The spike in views is likely linked to the increase of sponsored ads and also the ads' more prominent placements. Spending on sponsored products in searches at Amazon increased 165% year-over-year in Q2 2018, according to Merkle data cited by Recode.

Dive Insight:

The Recode analysis underpins just how quickly Amazon's e-commerce platform is evolving to get an edge on competitors, namely Google, which derives a massive amount of advertising revenue from paid search campaigns and sponsored product ads. The influx of sponsored ads on product and search pages additionally suggests that Amazon may be following Google's example in introducing more ad groups on its search results pages, according to Recode.

High-spending companies like Kellogg investing in the Seattle-based giant's own sponsored ad offerings signals that the area will continue to see accelerated growth, including heading into the key holiday season, where Amazon delivers consistently strong performance. The trick for Amazon, as Recode points out, is to not so heavily saturate its pages with paid content that the user experience breaks down and becomes frustrating — a difficult balancing act that other tech companies like Facebook are increasingly grappling with.

Marketers are attracted to Amazon for its wide customer base and the fact that roughly half all online product searches begin on its platform. In turn, that platform offers a wealth of search and purchasing data, which marketers can use to inform their campaigns. The competition among brands using Amazon is heating up, as marketers like Kellogg bid on their own and others' keywords to increase their visibility in a manner similar to how they have leveraged Google for years.

Since launching product ads in 2012, Amazon has been working to grow its ad business to better compete with the digital advertising duopoly of Google and Facebook, which control a vast share of the market. Amazon reported $2.2 billion in revenue for its "other" category, which mostly consists of advertising, for Q2 2018. While Amazon's advertising business is still comparatively small against Google and Facebook, ad sales grew 129% year-over-year, making it the company's fastest-growing category.

Beyond search, Amazon has continued to introduce features to support marketers on the platform. Last week, reports surfaced that it is testing an attribution tool to help advertisers compare the effectiveness of their ads on its sites versus on other sites — another shot across the bow at Google.