Amazon tests video ads in its shopping app, Bloomberg reports

Brief:

Amazon is testing video ads in the Apple iOS version of its shopping app, with plans to expand to Google's Android mobile operating system later this year, people familiar with the plan told Bloomberg News. The mobile video ads will put Amazon in more direct competition with Google and Facebook, which currently dominate the digital ad market.
Amazon requires marketers to spend $35,000 to run the spots at 5 cents per view for 60 days, although those prices vary by ad category, per Bloomberg. The video spots appear after mobile users search for products in Amazon's shopping app, which researcher App Annie said was the tenth-most frequently downloaded app in the United States last year.
Selling video spots in its apps expands the reach of an ad product that Amazon developed for its devices such as the Fire TV streaming device and Kindle e-reader app by bringing it to non-Amazon devices such as Apple smartphones, Collin Colburn, an analyst at Forrester Research, told Bloomberg.

Insight:

With more consumers shopping on mobile, and Amazon's app acting as a popular method for accomplishing this, video ads could turn into an important offering for the e-commerce giant. In the past, Amazon had been reluctant to load up its platform with intrusive advertising that would interfere with the shopping experience, but the company's approach continues to be more inclusive of advertising as revenue from ad sales grows rapidly, in part because Amazon offers some key advantages for brands over Facebook and Google, the dominant platforms.

Amazon generates half of all online sales in the United States, with many consumers first using its app or website to start shopping. Amazon’s key advantage over Facebook and Google is its highly personalized data about its customers, including their shopping histories and the viewing and listening habits of the 100 million people who subscribe to Amazon Prime. Like Google, Amazon can infer the purchase intent of consumers based on their product searches and give marketers a chance to reach shoppers as they’re most ready to open their wallets. People turn to Amazon when they’re most ready to buy, unlike when they look through Facebook’s feed or view videos on Google’s YouTube for news and entertainment. Amazon added more product videos to its site two years ago to dissuade shoppers from going to YouTube or Instagram to watch video demonstrations and testimonials from influencers.

The news comes as Amazon continues to eat away at Google and Facebook's dominating role in digital marketing. Amazon’s share of the $129.3 billion U.S. digital ad market is forecast to grow to 8.8% this year from 6.8% in 2018. That growth will eat into the market share of Google, Microsoft (including LinkedIn) and Verizon Media, while Facebook will continue to grow on the strength of its Instagram image-sharing app, per researcher eMarketer. Mobile video ad sales will grow about 23% to nearly $16 billion this year as brands shift their spending to reach increasingly mobile-first audiences, according to a separate eMarketer report.

Product search results were more dependent on price, product descriptions, consumer reviews and sales volume for their rankings. In 2012, Amazon introduced Sponsored Product ads that let marketers bid to have their brands listed at the top of product search results. Since then, some marketers have shifted as much as 60% of their search budgets usually allocated for Google to Amazon. Among brands that sell on Amazon, 57% are also advertising on the site, and 97% report seeing value, per Feedvisor.

Amazon’s test of mobile video ads comes as the company experiments with new marketing strategies, such as expanding its stable of private-label products that let the company capture a bigger chunk of sales than branded resale products. Amazon tested pop-up windows on its mobile app that showed its private-label goods on some of the product pages of rivals. However, the company risks alienating advertisers who buy sponsored listings or other ads, only to be undercut by Amazon's competing private-label brand.