Ecommerce.co.za

Amazon's seismic effect on the digital advertising landscape

by Grant Lapping: Digital Executive at new-age systems integrator, +OneX.
Ever since rumours first started circulating about Amazon entering the South African ecommerce market, most of the speculation has been focused on how the online giant could potentially reshape the competitive landscape in retail. But Amazon’s launch into the South African market could also have a seismic effect on the digital advertising landscape - so marketers should be paying as much attention as online retailers.

Over the past few years, Amazon has grown into a formidable player in the programmatic advertising market, generating more than $40 billion a year in ad revenues. Amazon’s status as the leading ecommerce platform in the Western world means that it attracts massive volumes of traffic - and it has turned monetising this traffic into a fine art.

One survey in North America found that among North American consumers, 50% of all product searches start on Amazon versus 31% on Google. This highlights how Amazon has managed to position itself not only as an online store, but also as a search engine designed to help shoppers rapidly find the best products and deals.

Advertising beyond the marketplace

Amazon doesn’t restrict its advertising platform to its massive ecosystem of marketplace merchants. Although there is a long list of restricted categories - including obvious ones like alcohol, competitions, gambling and weapons, and less obvious ones like financial services and food - the Amazon display network is open to non-Amazon sellers.

What this means is that Amazon’s launch into South Africa next year could offer many brands an additional advertising option in a market where Google, Meta platforms and TikTok dominate. Amazon hasn’t said too much about exactly which services it will launch on Amazon.co.za, but it seems likely that its advertising services and solutions will be part of the package.

These services are something that sets Amazon apart from even its largest local rivals, such as Takealot, which has already built a big ecosystem of marketplace sellers. Amazon’s enormous traffic and its expertise in cloud computing have enabled it to scale a programmatic platform that no South African ecommerce company could realistically compete with.

For companies that choose to list on the marketplace, advertising will most likely be a no-brainer. Those that get to the top of the listings when a customer searches for a product will generally get the most clicks - and it can be difficult to rise to the top without investing in advertising. As more sellers join the platform, it will be those that master the algorithms and ad tools that will get a competitive advantage.

Amazon DSP as a game-changer

But even for brands that run their own online stores and don’t want to become Amazon sellers, Amazon.co.za may become an interesting ad option. The Amazon Demand Side platform (DSP) will allow them to leverage Amazon’s user data and advertising tools to target customers that are already shopping for what they sell. Because Amazon’s traffic comes specifically from shoppers, it may offer a trove of data and algorithms that Google or Facebook can’t.

The Amazon DSP will feel familiar to anyone who has used the Facebook or Google programmatic platforms. Much like the other platforms, Amazon allows you to integrate first-party data into the DSP. You can build audiences using pixels, hashed audiences from which you can create lookalike audiences, and exclude new and existing audiences from campaigns.

You can also use a smart bidding approach, where you set a target key performance indicator (KPI) and the platform will auto-optimise the cost-per-click bidding strategy to maximise performance against your chosen KPI. Agencies that want to maximise the potential of the Amazon DSP will be able to tap into the Amazon Marketing Cloud (AMC).

This is a secure, clean room solution, in which advertisers can perform analytics and build audiences across pseudonymised signals, including Amazon Ads signals as well as their own inputs. This will enable agencies and their clients to develop even more sophisticated audience targeting capabilities and more successful customer journeys.

Amazon can’t be ignored as an advertising player

Digital marketers will no doubt welcome more choice in the programmatic space, especially if it catalyses competition. It will take Amazon.co.za a while to build enough traffic and marketplace sellers to really turn its platform into a serious contender - but it also has deep enough pockets to run at a loss while it gathers momentum. As such, it can’t be ignored as an ecommerce or digital ad player. Brands and agencies alike may benefit from exploring the opportunities Amazon’s entry will create for them in the year to come.

Useful resources:
+OneX
+OneX is a new-age solutions and systems integrator that helps enterprises to excel in a dual-speed technology world. As an end-to-end digital transformation partner, +OneX collaborates with clients to use cloud, data, security, and unified communications technologies to solve their business problems
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