Member Exclusive   //   June 13, 2024

Amazon Briefing: As competition grows, sellers invest heavy — and early — in Prime Day advertising

This is the latest installment of the Amazon Briefing, a weekly Modern Retail+ column about the ever-changing Amazon ecosystem. More from the series →

Prime Day is still a month away, but third-party sellers have been gearing up earlier than ever, testing out new tools and media channels in the process, for one of Amazon’s biggest sales events of the year. 

While Amazon hasn’t released an official date yet, the two-day event is slated to return in July. Last year, it took place on July 12 and July 13, and was announced by Amazon in mid-June. 

There’s a lot to be won or lost for Amazon’s third-party sellers, who make up more than 60% of the sales on the company’s online marketplace. Last year, on the first day of Prime Day, customers bought more than 375 million items worldwide — a record, according to company data. What’s more, sellers are grappling with several challenges that threaten to erode their profit margins, influencing how they handle this year’s sales event. 

For one, as Prime Day has grown in popularity, it’s gotten harder to get the attention of deal-hungry shoppers, pushing brands to leverage new marketing channels, such as ads on streaming platforms, to drive traffic to their listings. On top of that, Amazon’s new fee structure, announced earlier this year, is curbing sellers’ ability to offer Prime Day discounts, as Modern Retail previously reported. Meanwhile, shipping costs, advertising costs and the cost of goods have gone up dramatically, pressuring Amazon merchants even more.

The biggest winners of Amazon’s Prime Day used to be brands that offered the steepest deals and promoted them prominently on Amazon’s homepage. Now, as the competition heats up, sellers are advertising far and wide, and seeking out external sources — such as streaming platforms and social media — to attract more Prime Day traffic. All told, the slew of complexities has drawn out brands’ Prime Day preparations into a months-long affair.

“Brands are starting earlier and earlier to prepare for Prime Day,” said Brett Bardsley, vice president of advertising and digital marketing at  e-commerce accelerator Pattern. “I think when Prime Day started, a lot of people were primarily focused on that day, then it became two days, but now we’re talking about at least a month in advance.” What’s more, sales traffic tends to be higher following the sales event, which adds another month of intense focus for brands as they look to build customer loyalty. 

Nowadays, Jason Boyce, founder and CEO at Avenue7Media, advises his clients to begin their Prime Day prep in January, sometimes longer. 

“With 200 million Prime customers, there’s more competition for eyeballs than ever,” said Boyce. “Brands are getting smarter about how to get the most return on their investment because all the promotions and advertising comes at a cost.”

As such, brands are increasingly pulling new levers to drive traffic to listings. One of the ways brands are doing that is with ads on streaming platforms. 

“We’re seeing a 60% increase in streaming TV investment year to date, so a massive step up in spend,” said Bardsley. 

There are a few reasons for that. One, more streamers such as Netflix and Hulu have added ad-supported tiers to their subscription programs in a bid to boost revenues. Amazon became the latest to do so when it started bringing advertisements to its Prime Video offering earlier this year. Last month, Amazon unveiled plans to roll out new shoppable ad formats for Prime Video later this year. 

Customers are buying in. More than two-thirds of the viewership on Peacock, Paramount+ and Hulu will be ad-supported next year, according to eMarketer. 

Plus, streamers like Amazon’s Prime Video and Google’s YouTube can offer targeted ads based on their own first-party data, which is especially enticing to advertisers. As the death of the third-party cookie becomes a reality, first-party data reserves are increasingly a crucial selling point to attract advertisers.

Another advantage of Amazon’s streaming inventory is its more obvious connection to e-commerce opportunities on the platform. Brands able to include QR codes to send users directly to product listings on the Amazon website. Instead of treating these streaming ads as a long-term brand-building play, as marketers have traditionally approached television, Amazon is trying to convince brands that they can focus on conversions when they advertise via Prime Video.

“The beautiful thing with streaming TV is that the data lets you track the path to purchase for customers starting all the way at the top of the funnel,” said Bardsley. “You can get very rich data that informs how you optimize your marketing and advertising spend throughout the year.

One West Coast brand that sells vitamins saw a 166% lift in brand awareness when it started investing in streaming TV campaigns last quarter, according to Pattern.

For brands, it has become more difficult to stand out on Amazon’s crowded homepage, especially in the midst of Prime Day, pushing businesses to seek out alternative marketing channels. To be sure, Amazon has a robust advertisement business of its own, generating $47 billion in advertising revenue last year. While Amazon’s advertising revenue overshadows its e-commerce competitors, it trails that of Google and Facebook, which earned about $238 billion and $132 billion from their advertising businesses in 2023, respectively. 

Thirty-eight percent of Amazon sellers said boosting traffic to their product listings from external sites — whether it’s Google ads or social media — is a top focus area this year, according to a report from Jungle Scout.

Amazon even incentivizes its third-party sellers to do so by doling out credit in the form of 10% of qualifying sales to merchants who drive external traffic to the website. It’s good business for Amazon because often those customers are first-time buyers, the same report found. 

As part of that, Amazon has tried to make it easier for sellers to advertise on social media. In late 2023, the Seattle-based company announced partnerships with Meta and Snap that allow users to buy Amazon products directly from ads on Facebook, Instagram and Snapchat.

Still, 38% of 2,000 Amazon sellers surveyed by Jungle Scout cited increasing advertising costs as a top concern in 2024. That has some brands expanding to nascent and less expensive marketing channels to attract new customers and grow Prime Day sales. 

Abi Harmon, evp at e-commerce software platform Pacvue, has noticed more brands testing out advertising on platforms like Reddit ahead of Prime Day. Over the past year, Reddit has been looking to persuade more brands to buy ad space on the platform. Reddit’s ad revenue has grown 39% to more than $222 million, according to its latest earnings. 

Brands aren’t just buying ad space on the social media app. They’re also reaching out to customers directly through direct messages and comments on relevant threads. It’s a low-cost way to reach new customers, according to Harmon. 

“It’s an interesting strategy to use for Prime Day because you have a primed customer base looking for high-quality deals, and it’s just another place to get traffic and drive it to Amazon for that deal.”

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