By Suzanne Vranica
Advertisers are starting to shift spending on search ads from
Alphabet Inc.'s Google toward Amazon.com Inc., a sign of how the
online retailer is capitalizing on becoming the top destination for
consumers' product searches.
WPP PLC, the world's largest ad buyer, spent roughly $300
million on behalf of its clients on Amazon search ads last year,
and about 75% of that money came from Google search budgets,
according to people familiar with the matter. It spent between $100
million and $150 million on Amazon search in 2017, the people
said.
WPP spent north of $3 billion globally on Google search
advertising last year, one of the people said.
Omnicom Group Inc., another Madison Avenue giant, said between
20% and 30% of the dollars its clients spent on search advertising
last year went to Amazon search ads, with the majority of the cash
shifted from Google search budgets. The New York ad company spent
about $1.2 billion on U.S. search ads last year, according to
people familiar with its ad spending.
The shift in spending follows a major change in shopper
behavior: While Google has long been the dominant player in online
searches of all sorts, some 54% of people looking for a product now
begin their search directly on Amazon, a jump from 46% in 2015,
according to Jumpshot, a research firm that collects data from 100
million devices.
"Consumers are no longer double hopping between Google and
Amazon, they just go straight to Amazon," said Scott Hagedorn,
chief executive officer of Omnicom Media Group North America, the
ad-buying division of Omnicom.
The search-ad dollars shifting to Amazon are from companies that
sell products its platform, such as consumer packaged goods
manufacturers and retailers, Mr. Hagedorn said.
Google and Amazon declined to comment.
Amazon still has a long way to go to catch Google, which had 78%
of the $44.2 billion U.S. search-ad market in 2018, according to
research firm eMarketer.
The firm doesn't have a precise figure for Amazon's search-ad
revenue or how much it has increased, but estimates it will account
for at least half of Amazon's $11.3 billion in overall ad revenue
this year.
That would mean Amazon would take the No. 2. slot in U.S. search
advertising, vaulting substantially ahead of Microsoft Corp., which
is expected to have 6.7% of the market this year.
Spending on Google search ads continues to grow and is expected
to be up 17% this year to $40 billion, according to eMarketer.
However, Google's market share is expected to slip to 71% by 2020
as Amazon grows, according to the research firm.
Ad agency executives say Amazon's strength is its ability to
tell advertisers if their ads have led to purchases on its
site.
"The shift from Google to Amazon search is simple; Amazon has
the audience, the transaction, and the loyalty to Amazon Prime,
which clients can capitalize on," said Shane Atchison, chief
executive officer of North American operations at WPP's Wunderman
Thompson.
Amazon's advertising ambitions have steadily grown. Beyond
search, it offers other opportunities for marketers including
display ads, TV-like ads in live sports telecasts and targeted ads
it serves to people as they travel around the web. Overall, it is
now the third-largest digital ad player behind Google and Facebook
Inc. -- the "duopoly" that combined controls about 60% of U.S.
online spending.
Search ads on Amazon are called "sponsored ads," and companies
bid in an auction-based system to have their product ads show up
when a person types in a search term like "shampoo."
Men's grooming product maker Oars + Alps LLC was using Google
search ads last year but has shifted most of its search-ad spending
to Amazon. Its monthly ad outlays with Amazon now top $20,000.
"I was amazed at the return on ad spending on Amazon, so I
lowered our spending in Google search," said Laura Cox, co-founder
of Oars + Alps, which sells its products at Target, Amazon.com and
on its own website.
Ad executives said money for increased spending on Amazon search
ads is also coming from other ad and marketing budgets, including
in-store promotions and ads, and display ads.
Dentsu Aegis Network, another major ad buyer, said its Amazon
search-ad spending in the U.S. increased upward of 60% last year
but only a small portion of the money likely came from budgets
previously earmarked for Google.
Amazon doesn't sell search ads to companies that don't sell
their products on its site, such as financial services, insurance
and automobile companies -- categories that continue to fuel Google
search, ad buyers said.
In a move that could help it lure more search dollars, Amazon is
testing video search ads.
"Where they have had more challenges is bringing in more
brand-building type advertisers and video could help achieve that,"
said Vin Paolozzi, executive vice president of innovation at
Interpublic's ad-buying arm, Magna Global.
The rush of ad dollars to Amazon does have a downside: a big
jump in ad prices in competitive categories such as consumer
products, ad buyers said. The cost per click on the search term
"laundry detergent liquid," for example, was $17.51 last month, a
127% increase from September, according to Pacvue, which provides
tools for brands to optimize Amazon ads.
"Amazon was extremely inexpensive" a few years ago but the
influx of brands has caused a "significant increase in pricing,"
said Melissa Burdick, co-founder of Pacvue.
Some brands remain leery of the company, viewing it as a
competitor. Even as it helps other brands market their own
products, Amazon is increasingly hawking its own private labels as
well.
"I have to pay them for a top placement (in search results), I
have to give them a cut of the money that I might generate if that
product is sold, and Amazon might try to market their own private
label for the exact product that the customer is looking for," said
Deren Baker, chief executive officer of Jumpshot. "If I was an
advertiser, I would be a bit worried."
Write to Suzanne Vranica at suzanne.vranica@wsj.com
(END) Dow Jones Newswires
April 04, 2019 18:04 ET (22:04 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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