There are a growing number of signs pointing to a shakeup in how marketers are allocating their digital advertising budgets. Now to be sure Google and Facebook are still the top destinations for those ad dollars. But more and more you’re hearing about big brands beginning to switch as much as 50-60% of their budgets to Amazon.
With Amazon having a lot of momentum in the digital ads business, I had to pull in my Watching Amazon partner and ecommerce expert John “ColderIce” Lawson to talk about what he’s seeing in this area, how teens shopping is changing the digital ad spending equation, and what impact this shift might have on small businesses.
Below is an edited transcript of our conversation. To see the full convo check out the video or the embedded SoundCloud player below.
Small Business Trends: It really looks like, and I’ve seen a couple of different reports around this, it looks like Amazon is starting to make a dent when it comes to digital ads, so much so that people are saying Facebook and Google are going to have to look out because Amazon is number three, but they’re number three with a bullet.
John Lawson: The deal is, Amazon is where people go to buy. When they start shopping for buying, they’re starting to go to Amazon to look, and if they’re there and they’re seeing ads now, obviously, the ads are converting. Look, it’s not enough to have an ad network, but an ad network that’s converting massively is really a threat.
Small Business Trends: Yeah, a couple weeks back, kind of along the same lines, specific big digital ad spenders, big brands, I heard as much as shifting 50% of their digital ad spend away from Google to Amazon. That’s huge.
John Lawson: So they’re shifting the money.
Small Business Trends: Yeah, it’s not net-new spending
John Lawson: Right, that’s crazy.
Small Business Trends: It’s just shifting, which, that’s got to make Google feel a little antsy, and Facebook feel a little antsy.
John Lawson: Yeah, yeah. It’s like they’re cheating on me.
Small Business Trends: Kind of. But I think a couple years from now, this will get to be real big news because, as you know I like to talk about-
John Lawson: Oh, God.
Small Business Trends: With Amazon Alexa, and the devices, and more interactions, and more attention spans being placed on these devices, Amazon stands a great chance of figuring out the best way to monetize and change the ad model to fit that. If it’s already starting to penetrate the traditional… voice search is going to be a big part of it. People already doing their product search for information – about 50, 60% starts with Amazon. But just think about if they change that model to fit these new smart devices, and the attention that people are spending on those. That could really accelerate the process.
John Lawson: I think it could, but it’s also going to accelerate the cost, which might slow the process. Look, if I’m asking for, if I’m doing a product search on a device, I’m not going to want ten results.
Small Business Trends: Yeah, so Amazon is going to have to change the way the ads are displayed.
John Lawson: Yeah.
Small Business Trends: They also have to change the way reviews and ratings work with all that.
John Lawson: Right.
Small Business Trends: But they stand the best chance to make it work.
John Lawson: Right. They do. What I’m saying is, the number one spot [on search results list] is going to be so competitive.
Small Business Trends: Yeah, yeah. Yeah.
John Lawson: You know what I mean? That is going to be kind of expensive at some point.
Small Business Trends: It’s going to be real expensive. Does that price small businesses out of the market, you think?
John Lawson: Not right now. Here’s the key, small business, the advantage small business always has is being nimble.
Small Business Trends: First mover advantage.
John Lawson: First mover advantage. Get in there now, guys.
Small Business Trends: Start thinking about it.
John Lawson: Cool.
Small Business Trends: Alright, so this kind of leans to the second one we want to talk about. I saw this survey, and it’s posted on the Watching Amazon site, around sites that teens like to shop-
John Lawson: Yup.
Small Business Trends: Online.
John Lawson: Number two was Nike.
Small Business Trends: At 5%.
John Lawson: Number one was-
Small Business Trends: Amazon.
John Lawson: At?
Small Business Trends: 47%.
John Lawson: Do you see that? Number one’s here, number two is, you can’t even see it on the screen.
Small Business Trends: It’s like, yeah. It just goes down from there.
John Lawson: Yeah, everybody’s getting one or two percent.
Small Business Trends: I think, like you said is, you have a generation of folks that don’t know how to shop any other way.
John Lawson: Yeah. When they think of shopping online, the only thing they think about is Amazon because that’s all they’ve ever heard.
Small Business Trends: Those numbers just pointed out, that’s a tough road to hoe if you’re anybody else.
John Lawson: Right. If you just think, the way social media has grown. The first group of social media freaks were on Facebook, and we’ve grown with Facebook over time, even though other new things came up. I think this early adoption by these teens are going to expand as they grow. It’s not going to necessarily change that experience. You kind of hang onto what you know well.
Small Business Trends: You think about what we just talked about. These advertisers are already starting to switch. Teens have already … They didn’t even need to switch because that’s all they’ve known.
John Lawson: No.
Small Business Trends: So, as these teens, their spending power gets more and more, and greater and greater, that advertising shift is probably going to accelerate because the advertisers are going to want to make sure they’re connected with these teens.
This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it's an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.
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Amazon makes it hard to be a little guy with their shipping requirements and the whole FBA thing. Add on top of it the fact that they double dip with a percentage of the sale AND ad costs? It’s going to be a playground more for the big boys in my opinion.
Hi Robert, that is not necessarily true. There are nearly 2 million small and medium businesses operating on Amazon right now and growing daily. I started my small business with just myself and my spouse on Amazon back in 2009 and we have been successfully operating on that platform every since.
It is VERY doable, but of course there are challenges to make it work correctly.