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PLAs Key to Beating Amazon in Search as Retail Giant Enhances Paid Presence

As the holiday shopping season is now fully underway, many retailers find themselves surveying the landscape to judge how well they're doing vs their competitors and other retailers in general. Amazon has been a major competitor in almost every industry over the past few years, expanding its product selection and entering into video streaming and web services. While its presence in paid search has likewise been fairly large, Google Auction Insights data shows that the e-retail giant is moving up the page with its paid ads, and entering into auctions for more product categories every day.

Amazon Carving Up the Page Everywhere

Taking a look at account-wide Auction Insights data for RKG clients in a number of different verticals, it's clear that Amazon is pushing up the page for nearly everything. Here's a look at Amazon's monthly average position in a handful of different industries going back to the earliest month Auction Insights data is available for.

Amazon Average Position by Industry

The data shows that Amazon has moved up between 1.1 and 2 positions in each industry since May, 2012. This has continued into the December shopping season. Amazon's impression share of the auctions these advertisers compete in has also been increasing:

Amazon Impression Share by Industry

There are several explanations for how this could be happening, such as increased bidding and more expansive keyword coverage. Let's explore.

Bidding More Aggressively

Amazon could be ramping up bids on its text ads, in which case there are a few possible reasons that could be driving the decision.

Treading Water:

While these charts show how much more prevalent Amazon is becoming with text ads, they exclude Shopping campaign impression share, which was just made available in November. As such, Amazon's impression share is much higher in these figures than what it would be if product ads were taken into account, since Amazon decided to forego bidding on PLAs when they moved to a paid model. Taking a look at PLA share of total Google impressions for RKG clients bidding on both PLAs and text ads, we see that the share of total impressions attributed to PLAs has more than tripled since May, 2012.

PLA Share of Google Impressions

Thus, Amazon may be becoming more aggressive on text ads as more and more traffic moves over to PLAs in order to keep their paid search traffic from dropping. It's not entirely clear why Amazon refuses to pay for PLAs, since they've become such a large source of revenue for so many advertisers. Perhaps the idea of passing Google a bid for each product is thought to give Google too much competitive insight into the value of clicks on Amazon's different products. Regardless, Amazon's aggressiveness in paid search can only go so far as long as they continue to refuse to pay to play in the PLA space.

Better Return:

Considering Amazon's growing base of Prime members, it could very well be the case that their paid search conversion rate is increasing over time as more and more existing Amazon customers head back to the site through paid search for the promise of free shipping and a quick check out process. As the value of clicks goes up, Amazon would then likely be willing to bid more.

Different Goals:

It's also possible that Amazon has changed their efficiency goals, either because they were being conservative in the past, or because they're now willing to take a loss (which wouldn't be surprising given that they've frequently operated at a loss as they've grown their business over the past few years). There are also other possibilities outside of increased bids that may be driving the figures we're seeing.

Increased Keyword Coverage

An increase in account-level average position in Auction Insights doesn’t necessarily mean that Amazon is bidding more relative to the advertisers studied. An alternative explanation is that they are now bidding on more keywords which overlap with these advertisers, and are higher on the page for these newly introduced keywords than they were with older keywords. Increased keyword coverage could be the result of better campaign management on Amazon's part, or a natural result of their ever-expanding inventory requiring additional long tail terms for full coverage. Evidence of such keyword expansion does exist, as one advertiser selling recreational sports equipment began seeing Auction Insights' Amazon impression share of over 35% starting in October of this year after having never previously seen Amazon even appear in the Auction Insights report.

Conclusion

Regardless of rationale, Amazon is showing up in more text ad auctions at a higher average position than ever before across multiple industries. This is obviously worrisome for online retailers, though no one in e-commerce needed additional reasons to fear that Amazon could put them out of business. Taking a look at our own fairly large advertisers, it doesn’t appear that Amazon's paid search presence is having a significant impact on our own paid search performance, as we saw significant growth year-over-year over the holiday weekend. Some advertisers are obviously losing traffic as a result of Amazon's movement up the page, however, and it may be that smaller businesses are those feeling the impact the most. Regardless, as long as Amazon remains out of the PLA space, its overall share of paid search traffic will never be as high as it could be, to the benefit of all other advertisers who are taking advantage of product ads, large and small. While the data didn't show a dramatic increase in impression share or position shift in Q4 of last year for Amazon across industries, it will be interesting to see how much more aggressive Amazon gets with their text ads as they duke it out for sales during the biggest shopping season of the year.
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