Advertising on Amazon goes well beyond the sponsored ads that appear anytime a consumer initiates a search for a desired product. Such advertising is familiar—if a consumer searches for an exercise ball, firms that manufacture exercise balls are going to pop up on the results page and promote their version of the item. But Amazon’s insights into how consumers behave is not limited to that specific search instance, so it also is enabling advertisers to identify and promote their offerings to people who might be interested, even if they are not searching for that particular item at the moment.
For example, the person searching for an exercise ball also might have sought out moisture-wicking exercise gear last week. With this information, Amazon makes it possible for a sports apparel company to display its advertising at the moment the consumer starts looking for exercise balls. By expanding the targeting to the entire history of searches and purchases each consumer has made on Amazon, it enables advertisers to achieve far more specific, appealing, and efficient marketing communications.
The results are impressive. A company that sells low carb cheese snack bars gained information about consumers searching for cauliflower-based pizza crusts (another low carb option) and sent advertising their way. In the course of three months, it gained approximately 22,000 clicks, about 4,000 of which led to purchases—an astounding conversion rate of close to 20 percent.
Furthermore, the insightful information is provided readily and freely by consumers. On Amazon, they signal whether they have sustained an injury (by searching for analgesic creams or knee braces), how old the children in their household are (by selecting age ranges when they search for kids’ clothing or toys), and what car they drive (by listing it in the Amazon Garage section). Such willingness to provide detailed information addresses one of the main challenges for advertisers that want to segment and target consumers according to personal characteristics that truly influence their buying behaviors—that is, gaining access to the information.
Previously, Amazon performed all the targeting operations through its in-house advertising department and required a minimum investment, such that this option was relatively expensive, and only the largest sellers generally could afford to target their advertising so precisely. More recently though, a self-service version allows small companies to leverage the powerful tools as well. The advertisers then can choose how much to spend to obtain the information, as well as which information to purchase, whether that includes details about media watching habits or insights into buying trends. By showing advertisers what people have bought before, Amazon is enabling them to predict with great accuracy what they will buy next.
1. What type of data does Amazon make available for advertisers that want to target shoppers precisely?
2. What kinds of behaviors are consumers displaying and sharing by searching and shopping on Amazon?
Source: Karen Weise, “Amazon Knows What You Buy. And It’s Building a Big Ad Business from It,” The New York Times, January 20, 2019