Transcript:
Peter Crosby:
Welcome to Unpacking the Digital Shelf where we explore brand manufacturing in the digital age.
Peter Crosby:
Hey everyone. Peter Crosby here from the Digital Shelf Institute. With Amazon's ad revenue now reaching around $10 billion a quarter, the discovery research and shopping experience on page one of search results has been dramatically transformed. But how? Does anyone know and know what you should do about it? Turns out, yes, Acadia, the digital agency for Challenger Brands teamed up on a study with Analytic Index called Init to Win It. How Amazon is pay to play for brands, why that matters and what to do to win. How could we not get Kiri Masters head of retail strategy at Acadia on the podcast to talk about it. Kiri, thank you so much for coming on the podcast today and bringing us another great piece of research.
Kiri Masters:
It's great to be here. Thanks for having me.
Peter Crosby:
Yeah, and just when you're tackling a very important question for brands is, is Amazon now pretty much a pay-to-play site in order to win search? Winning on search can help you grow your brand, but it also comes with a ton of investment and probably a ton of headaches. How did you set out to answer this question? What are you hearing from brands?
Kiri Masters:
Yeah, definitely. Well, as you mentioned, it's something that a lot of brands and practitioners on the agency side, which is what I am, have long sort of hypothesized that this is the case. That you can't just show up to Amazon today and put up your product content and some brand content and expect anyone to be able to find your product or to actually build any sort of meaningful momentum on Amazon.
Peter Crosby:
Organic ain't what it used to be is that?
Kiri Masters:
Yeah, it's very crowded, it's very competitive on Amazon. It's where people are shopping, but it's also where brands understand that's where shoppers are shopping. So you need a way to stick out amongst all of the other brands. And there's some strategies that are well discussed like conquesting and things like that, but there's still this sort of question for a lot of brands of, well, how competitive is it and what does showing up and participating really look like for my brand and my category as well?
Lauren Livak:
I'm curious, some of the numbers that you shared in terms of what the real estate on the page actually looks like, is fascinating to me. What does it look like for sponsored ads versus organic search results now on Amazon?
Kiri Masters:
Yeah, exactly. So to answer this question about to what extent is Amazon pay to play and what does that mean for an individual brand within a category? We partnered up with one of our technology partners Analytic Index, who actually looked at over 600,000 brands in various categories and did some really fancy modeling to figure out from a volume weighted standpoint how organic visibility is affected by paid placements as well.
So there's a few different things that came out of that, which I'm sure we're going to get into, different questions that we were able to answer. The question that you asked Lauren about placements is quite a simple one, simple to ask and simple to get a general feel of when you go onto amazon.com, which is when you're doing a search for anything really, whether it's toothpaste or a cocktail dress, you're going to see a lot of ads and some consumers are not even really aware that they're ads.
But certainly for people who are in the game, you can just see sponsored products, sponsored headline search or a sponsored brand ad, display ads. Once you understand what an ad looks like, you just see them everywhere.
And so this is a very interesting phenomenon where we wanted to track, well, what percentage of real estate on Amazon is taken up by ads? And the quantitative finding that we got to was percentage of sponsored slots on page one by category or department. So for the electronics department, that is the department that has the highest percentage of sponsored slots versus organic slots, and that was at just over 21%. So 21% of the page is taken up by sponsored slots, and that doesn't include sort of other gray area placements like editorial placements or Amazon's own brands. They kind of get some special treatment sometimes.
So yes. Is Amazon pay to play? Well, yeah, actually in the electronics category 21% of real estate is taken up by ads. So couple of different ways to skin the cat in terms of figuring out is Amazon pay to play, this is one that anyone going to amazon.com and searching in different categories can see just how much real estate is taken up by ads?
Peter Crosby:
Well, and we just did a fresh piece of research that's coming out it either by the time this rolls will have already come out or will be shortly coming out. And one of the questions we asked is where do you go to discover products? And Amazon was number one by a significant margin, particularly in the US by an EMEA. Australia, less so probably due in impart to Amazon's presence there. Then in store then search engine, then retailer site, then retailer shopping app. So you really can't afford to leave it to chance anymore because it is the discovery engine for a lot of consumers.
Kiri Masters:
That's really interesting. And there is a big difference, and we might start getting into the breeze here, but as you're talking about discovery, it can be a discovery platform because people are there. They might be searching for something specific, but because of what we can bid on in terms of keywords, we might have a general idea that someone who is looking for, for example, last night my son and I were looking for fake spiders because we're planning on playing a lot of pranks over Christmas. And so someone who's searching for the fake spiders, then I was seeing all kinds of costumes or other prank ideas, so I had something specific in mind. And that's the way that a lot of activity occurs on Amazon. Someone has something specific in mind.
But Amazon's also building up an understanding of what is that person interested in, what are they in the market for? And that is the type of audience targeting that we can do with advertising to help drive discovery and use Amazon, not just as a bottom of funnel advertising vehicle to meet someone where they're at when they're looking for fake spiders.
Peter Crosby:
I love your idea of holiday bonding. It's a gentle cruelty of mother and son. It's relatives and friends.
Kiri Masters:
Yes. This is going to come out after Christmas, so all the price [inaudible 00:07:38]
Peter Crosby:
We'll have to do a little catch-up episode on how it all went.
Kiri Masters:
For sure. But yes, I think the general point of discovery versus bottom of funnel is a really good point to make because as we found in some of the other frameworks that we developed from this research, there is definitely a direct relationship between sponsorship or advertising and organic visibility.
But there's still a real maturity curve involved here as well. We've talked previously about the maturity of certain brands and their adoption of e-commerce, but something that was interesting that we found was some of these brands that have a real legacy, so a Nike or even a Crocs or a Lego, Disney, brands that have invested in brand marketing for a long time outside of Amazon. People are searching for Lego, they can go into this naturally high performers category where they have so much equity and recognition they don't necessarily need to be as active with advertising on Amazon as a brand that is really trying to break through would be.
So what we came up with was a matrix that kind of shows four different categories of brands. It could be naturally high performers that have a lot of legacy, a lot of brand recognition, the pay-to-play segment where you know that your advertising is actually really paying off. There's the no-go zone, where these brands are spending a lot of money on advertising, but they're not actually seeing any organic search visibility payoff from that. And then the law of averages, there's a lot of brands in a zone where they're not really spending adequately or getting the organic search relative to peers in that category.
Lauren Livak:
And Kiri, I feel like this kind of changes the game with how brands think about success in search. Meaning we used to say top 10 spots on search was a goal for a metric for your brand. But if some of those spots are taken up by sponsored ads or Amazon specific brands, what's left from an organic standpoint that you can actually achieve success? Have you seen brands totally reevaluate the KPI about search to be able to define what success looks like?
Kiri Masters:
Yeah, that's a really good question. I think it's going to, an important question there is whether a brand is focused on revenue growth or some kind of growth metric, market share category share, something like that versus something more profitability related, contribution margin, ROAS, those kinds of things. That's really going to dictate how aggressive you might be in taking out those top slots. And then also what your competitors are doing. So you might place really well organically, but you have a super aggressive competitor who's conquesting your brand term. That might be a position that you want to defend, but you're going to have to be willing to pay for that. And so for a lot of brands, they might take the position that I don't want to pay for a placement that I might be able to achieve organically. Well guess what? There's probably some competitors lining up to bid on your brand term if you are not, and that's a pretty easy win for them if you are not actually paying to defend that.
But it's going to come down to that objective, which is something that I always try to bring brands back to when that they're looking at what their strategy should be because it's going to be quite different brand to brand depending on whether they are a challenger brand looking to make up market share or if they're a legacy brand that is towards the end of the maturity cycle and they're not necessarily prepared to defend their position in the face of lowering their contribution margin or something like that. So it's going to depend a little bit on what the brand objectives are, but we'd like to look at both share of voice for sponsored and then organic as well, depending on what the brand's real objective is.
Peter Crosby:
So Kiri, this sponsorship lift matrix is pretty cool the way you have it kind of laid out your upper left quadrant organic winners, which is very few. And then the pay to play on the right, which seems to me, I mean when you use these four box things, usually that's sort of where you want to be. And then there's a bunch of people way over on the left bottom and the free market. The one I'd love to just zoom in on a second is the wasted spend one because that I would imagine would drive a stake in anyone's heart. And so what are the practices that land you there and what are your advice for how to make sure you're not in that dreaded bottom right box?
Kiri Masters:
Yes, absolutely. And you're right, the organic winners, that's very aspirational, but this is really the place for the crests of the world or Legos or Nike like I mentioned. And wasted spend, definitely, that's where you don't want to be.
So just as a quick anecdote, we did an audit for a brand using this framework, which we can do if you're a brand that's in the top 250 of your category, we can show where you're showing up on this sponsorship payoff matrix. Just get in touch with us. We did this analysis for a brand and then got into a little bit of what is your next competitor look like in this matrix?
And it turns out that this brand was spending about seven times more than they needed to based on what we knew their next competitor was spending on advertising. So that's one sort of very real takeaway that if you're aware that you're in this wasted spend quadrant, and there's a few different ways to go about measuring this and determining it, you can find out that you're spending more than you really need to. And that's going to be music to anyone's ears to understand that maybe you could move some of that funding from brand over to bottom of funnel or something like that.
Sometimes it's just about reallocating to a different kind of strategy. But that was one particular instance where we were able to see you could actually afford to be spending a lot less here and get more or less the same result.
Peter Crosby:
So Kiri, I think in what you were saying, I heard maybe an offer that I just wanted, you were saying, hey, if you want to know where you're on in this matrix, reach out. Is that something that, is this an offer for the DSI listening audience and is LinkedIn the best way to reach you because that kind of info sounds pretty valuable?
Kiri Masters:
Yeah, absolutely. So this analysis, we really just reach into the top 250 brands per category. So if you are a smaller brand, you're just not going to show up in the data here. But certainly reach out to me, you can reach out to me on LinkedIn, Kiri Masters or drop me in email. Lots of different ways to reach me. I'm pretty responsive.
Peter Crosby:
I can vouch for that. So are you finding that this sort of matrix looks the same across all categories? Like you had mentioned earlier electronics is 21.6% sponsored and personal care and beauty at 14.2. What are some of the really category differentiations that you pick up on?
Kiri Masters:
Yeah, well this is where it's really interesting to see how much more, so the percentage of real estate really speaks to competitiveness. And then there was some other analysis that we did looking at the correlation between sponsorship activity or advertising and organic visibility. So doing a correlation, a fancy correlation that is called a volume weighted ask where, don't ask me to define what that is, but it's a very smart statistic.
Lauren Livak:
Sounds official.
Kiri Masters:
So looking at that correlation and the departments that have a high correlation, this is where they're going to see a really strong relationship between ads and organic lift. So the top two categories there in terms of correlation are electronics at close to 70% correlation and then beauty and personal care at just over 64%. And then by comparison, the lowest correlation categories are gourmet and grocery food, 31% and clothing, shoes and jewelry at 22%.
And between me and our partners Analytic Index here, we're speculating, why would that be? And I'm open to other theories on this, but our theory really here was that we're talking about high and low margin categories here. So electronics and beauty and personal care often, not always, often fairly high margin categories whereas grocery and food and apparel less so. And then also on the maturity curve again, of which categories came online fastest. Electronics, we've been able to buy electronics for a long time online and grocery is more of a recent purchase that people have made on online recently. So my general experience is that grocery brands are really starting to wake up to the retail media opportunity, whereas electronics brands have been advertising on eBay back in the day for a really, really long time. So this is much more part of their DNA than a grocery brand.
Lauren Livak:
So Kiri, in your data, it also showed a bit about an always on approach versus a specific sponsorship approach. So I'm really interested to hear your takeaways on that because I know brands are really trying to balance, should there be an always on strategy? Should it be just a specific event? What did you see from the data?
Kiri Masters:
Yes. So I was really excited to dig into this with some real data because again, this is a topic that people have strong opinions about and it's usually based on a small number of data points or some personal experience.
So we did a deep dive into the hair dryer category around Prime Day of 2022. So summertime Prime Day, to help answer that question. So we looked at an always on strategy for two brands and then a double down strategy for one brand where they really just dipped in and out over Prime Day. So the one brand using an always on strategy is Conair. Conair is a widely distributed brand, has lots of brand recognition and they have constant levels of sponsorship. And then we also wanted to look at a challenger brand in that category. So there's one called Tymo, T-Y-M-O. So a smaller brand, does not have the brand recognition, and they both had fairly constant levels of sponsorship before Prime Day and then had some increase in sponsorship on Prime Day and then went back to their maintenance mode after that.
So for both of those brands, both Conair and Tymo, their organic performance directly followed the trend of their sponsorship. So suggesting sort of minimal like long-term impact from their Prime Day activity, but we could see that their always on strategy produced, sort of a consistent result. And then we compared that outcome with two brands that doubled down on advertising around Prime Day. One, the Babylis Pro that's a widely distributed brand that ramped up sponsorship leading up to Prime Day, but stopped sponsorship after that point. So for that company in the long term, their Prime Day bump in organic search performance barely lasted a week as their sponsorship activity trended down and organic performance followed soon after that as well.
And then in the fourth example, we looked at Drybar. Drybar is a newer brand, they heavily increased sponsorship around Prime Day and then continued with a similar level of sponsorship after. So they sort of ramped it up and then kept it up. And the long-term lift in organic performance looks much more correlated with the long-term change in sponsorship activity, while Prime Day actually did little to change the trend of gradually increasing performance. So overall from those data points, looking at increased Prime Day sponsorship, it does produce a short term improvement in visibility, but search performance tends to go back towards the mean shortly after that. And long-term gains come from sponsorship and consistent ad spend over time rather than just jumping in and out around sales events.
Peter Crosby:
But that must be tough. I mean, when you think about overall strategy for ad spend and on both sides, we often talk to brands from both sides of that separation and each of them complains about the other in terms of how they impact their business. The challenger brands are like, I don't have that kind of budget to go in and flood the zone. And so they feel very much behind the eight ball on that. And the more mature ones are like, I can't get the fizzy attention. And they are very good at their experiences online and their relationships with their consumer and that drives maybe more organic success for them.
So often with the budget restrictions that challenger brands have, that's probably why they're sort of flooding the zone at events and then disappearing. What is your advice on both sides of those separations based on the data that you saw?
Kiri Masters:
Yeah, so this is a particularly important question for seasonal brands to think about as well. If you're a brand that has the peak season over the winter months, then you might feel like it's a good idea to drop off in the summer. But depending on what your competitors are doing, that could actually be a really good time to be building up that audience.
People are still doing research and considering purchases during those months, and particularly if your competitors have gone quiet during that period, that's going to be great. That's going to produce a really good return for you. You can build up audiences that you could re target later on, et cetera as well. So I would caution people to look into the activity of competitors in their direct subcategory to see what's really going on there.
But certainly from our experience as an agency, and certainly from some of the data points here, it does suggest just jumping in and out of big sales events and having that be the focus is not really going to drive a meaningful long-term lift. And especially if we think back to that sponsorship lift matrix, you want to get out of that wasted ad spend quadrant and into the quadrant, which is that you know that dollars that you're putting into advertising are actually driving a meaningful effect on your organic visibility too.
Peter Crosby:
With the maximum, most efficient spend that you can achieve.
Kiri Masters:
Yes, exactly.
Peter Crosby:
Well, Kiri, this partnership between you folks and Analytic Index, it's a really great combination of data and strategy and I love that you worked with them. We love Nathan and the folks at Analytic Index, they were on the pod recently. It resulted in a really interesting report that I think should drive a lot of deep thinking at brands that are thinking about their 2023 ad strategy.
So just a reminder that you did make that lovely offer, that if people want to get where they are on the matrix, they can reach out to you. And in addition to the kind offer from Kiri, you can also get the report if you'd like, at acadia.io/paytoplay, pay to play all one word. So Kiri, thank you so much for the great thought leadership and for coming on the podcast. We always love having you.
Kiri Masters:
Thank you again for having me. Great to talk about this and move the conversation forward.
Lauren Livak:
Thanks Kiri.
Peter Crosby:
Thanks again to Kiri for sharing all these insights. Again get the report at acadia.io/paytoplay. Become a member to keep getting all these super cool offers of help from experts by going to the top of the homepage at digitalshelfinstitute.org and clicking the Become a Member button. Thanks for being part of our community.
