What’s behind the recent Amazon DSP Growth?

Amazon Advertising has swiftly grown to become arguably the leading digital marketing platform globally. It is the go-to choice for a wide variety of retail and eCommerce brands across varying sectors, thanks to both the scope of the audience and depth of targeting options available. The wealth of data on hand to aid in comprehensive and intelligent decision making as an advertiser is also paramount to its popularity.  

One of the key facets of Amazon Advertising is the Amazon DSP (Demand Side Platform). We asked George Meressa, MD of Clear Ads about and he said “The platform is currently undergoing a period of dramatic expansion and popularity, with new functionality which has seen Amazon solidify its place as a major player in international digital advertising.”

A new report confirms that DSP is more popular than ever. According to the latest Amazon Ads Benchmark Report, there was a 44% increase in spending in Q4 2019, compared with the previous quarter. The report was compiled from performance data drawn from Amazon programs. It included only those advertisers who could be considered active on the platform through the quarter, with a consistent presence and strategy. This means the actual spend could be far higher. 

What is a Demand-Side Platform? 

A demand-side platform makes the purchase and management of many different ad formats easier by centralising the process. This makes it quicker and easier for advertisers to buy the ads they want from multiple sources.

To that end, not only does Amazon DSP encompass Amazon’s own ad inventory, it also covers sites and properties which are owned or operated by the platform. Big names under this umbrella include FireTV, IMDB and Kindle.  

How did Amazon DSP perform in the last quarter? 

The figures show that ad spend made within the Amazon ecosystem accounted for 69% of all DSP spend in Q4, proving definitively that Amazon DSP is not going away any time soon. 

In addition, sites owned and operated by Amazon were responsible for around 78% of all purchases under the new-to-brand umbrella. This was a marked increase from the 71% registered in the previous quarter. New-to-brand purchases are classed as sales which have occurred for the first time over a 12-month time period, though it can also include repeat sales which occurred more than a year ago. 

It is essential to acknowledge that Amazon’s DSP can be used by a wide variety of different brands investing in programmatic ads, with no caveat that they must already be selling on Amazon itself. Purchased ads can be directed to non-Amazon landing pages.

A number of other exciting findings also emerged from the study. Campaigns which focused on awareness and consideration (encouraging interest from prospects rather than immediate sales) for example, have grown in popularity over the last 12 months. The report suggests that this type of advert was actually more common than immediate purchase driven ads by year-end, with awareness and consideration accounting for 6 in 10 DSP adverts. It is thought that this trajectory was fuelled by a growing number of brands attempting to break into new markets, using DSP ads as their starting point.

The Amazon DSP difference 

Amazon DSP is not the only demand-side platform available to advertisers of course, but the wealth of consumer behaviour data it holds gives it an almost unassailable advantage. This data puts Amazon in a unique position by allowing it to understand trends and buying habits with much more clarity than other DSP options. 

While Amazon has historically taken a managed services approach to DSP, it has also added several new self-service capabilities of late. This means its DSP has increased appeal for a broader and more diverse range of customers, giving it the edge over rival options. This flexibility – along with the platform’s reliability and its many other appealing aspects – contributes significantly to Amazon DSP’s dramatic uplift in traffic.

Understanding programmatic advertising

The appeal of Amazon DSP is far-reaching, but to really know why this is, first we must carefully look at programmatic ads and the purpose they serve. In brief, it covers the act of buying an ad placement in the digital space using an automated process. 

These ads use dynamic pricing, which allows advertisers to adjust their bids and take more control over their budgets. The adverts can also be scaled carefully with precise targeting, to maximise the value of every click or impression within the campaign. 

Advertisers who are eager to be more efficient with their budgets and their advertising activities tend to find this ad format hugely appealing, as it works with predefined levels of spend and makes it easier to achieve campaign goals. 

Programmatic ads have a big element of automation, as AI is used to decide which ads to buy and which of these adverts should be seen by a specific customised audience. This means much greater accuracy at scale. As adverts can be very precisely targeted, there is minimal wasted ad spend. 

How does Amazon DSP compare to its competitors? 

Before this latest sharp increase, Amazon DSP has been on a steady upward trajectory since 2017. It now handles around half of all digital ad purchases. This statistic places it favourably alongside other programmatic ad options including Google, which saw its own purchases drop significantly during the same time period. 

There have been a number of competitors trying to make waves with this form of advertising. Verizon Media, The Trade Desk and AOL have all attempted to assert their dominance with DSPs of their own; however it now seems that when the final battle lines are drawn, it will be Amazon DSP which reigns victorious. 

There are many reasons why Amazon DSP has been able to succeed where others have failed. It is amongst the biggest e-commerce platforms globally, with an enormous database of information on each and every purchase. This wealth of data is hugely valuable for advertisers, and therefore represents perhaps the most compelling reason for brands seeking a DSP to power their ad campaigns to choose Amazon.

Amazon is notable for tracking its users throughout the customer journey, with an integrated approach which transfers across platforms and stands up well to the complexities of omnichannel reach. Advertisers are therefore able to gain a greater understanding of what motivates each sale and gain much more of an insight into who they should target, how that consumer acts, where to connect with them and how successful their efforts have been.

It was not so long ago that Amazon was trying to break into the space, making its rapid and continuous growth all the more impressive.

Why is Amazon DSP growing? 

There are, of course, a number of reasons why Amazon DSP continues to grow while its competitors see a downturn in business. The main reasons, however, can be defined as the following: 

  • Low fees 

In comparison with other DSPs, Amazon has significantly lower fees. When combined with its effectiveness, this makes the platform incredibly appealing to a broader audience, helping to fuel DSP adoption rates. 

With a smaller investment asked of them, Amazon DSP is more accessible to more businesses than its rivals. This gives it access to a somewhat forgotten network of advertisers and brands who would like the use of a demand-side platform but have previously been priced out of the space. 

  • Self-service 

Amazon DSP does not demand users sign up to the managed services which are on offer, yet they are still there if needed or desired. This is a significant step in the right direction for brands who want to have the flexibility to make their own choices. 

It also enables newcomers to assess what is required based on the time and expertise they have at their disposal. For advertisers who are particularly digitally savvy, the idea of being able to pick and choose according to need and inclination is especially appealing. 

  • Advertisers reduce their use of alternative platforms 

Another aspect which contributes strongly to Amazon DSP’s continued growth is the fact that many advertisers are shifting away from their original methodologies and instead limiting the number of platforms they engage with. 

A number of DSPs created by other platforms are hard to differentiate from one another, with each containing very similar features and capabilities. Their market share continues to reduce as Amazon’s expands. Due to the strength of the platform as a whole, it is now possible for advertisers to consolidate their entire activity within Amazon DSP rather than flip between multiple platforms. This, in turn, significantly contributes to a larger overall ad spend on Amazon. 

Not only is reducing the number of other platforms utilised at any given time useful as a means of reducing confusion, but it also allows ad buyers to actively reduce their ad spend. Widely considered to be a move in the right direction for brands and advertisers (particularly in turbulent economic times), this new approach and Amazon’s comprehensive fleet of tools suggests good things are on the horizon for Amazon DSP in the year ahead. 

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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