Amazon Sets Its Sights On An Even Bigger Prize: The Non-Endemic Advertiser

Amazon’sAMZN
advertising unit was a bright spot in its recent Q3 earnings. Advertising revenue is very profitable, and it’s growing.

But Amazon is preparing for a future where that growth may slow down by looking to other market segments that would benefit from its growing array of advertising solutions.

“Non-endemic” brands are those brands who don’t sell physical goods on Amazon, but may advertise on its site or other owned media properties. Think car manufacturers, insurance companies, and restaurants.

At its ‘Unboxed’ conference in October, Amazon announced a new way for non-endemics to advertise on Amazon.com – the Sponsored Display advertising type. This is a completely self-serve ad type that doesn’t require any minimum spend, and is particularly simple to setup, deploy, and manage compared to Amazon Demand Side Platform (DSP), Amazon’s programmatic ad platform. This effectively removes any past barrier for non-endemic brands to advertise on Amazon’s giant ad ecosystem.

For brands actually looking for more sophisticated ad buys and reporting, they can use the DSP in combination with the Amazon Marketing Cloud – marrying their own sales data with DSP impression data, showing which ads helped customers along the purchase journey.

With these tools ready, Amazon is hastily trying to shake off a perception that its ad capabilities are purely for consumer brands. At Amazon Unboxed, the big opening case study was not for an endemic brand, but for Carnival Cruises, which is the sponsor of Amazon’s new tv show The Pile On. The strategy is starting to work, at least with Amazon’s streaming tv placements. Thursday Night Football and Freevee both have a lot of ad placements from traditional non-endemics like State Farm, Geico, and Hyundai.

These brands are able to benefit from Amazon’s rich understanding of their customers’ demographics, purchase history, and interests. While watching a Freevee tv show recently, among ads for Geico, Oreos, and Sensodyne, I was shown a Zaxby’s ad. Zaxby’s is a regional fast food chain with locations almost exclusively in the Southeast. As an Atlanta resident, this ad was relevant to me, and Zaxby’s likely had been targeting viewers by geography.

Geography is one of the simplest forms of targeting, but I expect much richer targeting options to be used in the near future to serve impressions to users at various stages of the buying journey. Amazon knows what model of car I own from the type of car mats I just bought. They know I’ll possibly consider a car upgrade soon, and might include me in a pre-built audience of potential car-buyers that Hyundai would advertise to. Amazon also knows from my grocery purchases that I’m health-conscious and live in Atlanta, so perhaps Sweetgreen should be more interested in targeting me than Zaxby’s is.

This new market for advertisers might be great news for Amazon shareholders, but not everyone will be happy about Amazon’s diversification strategy. Endemic brands (who actually sell their wares on Amazon) may find the increased competition for ad slots increases their cost of advertising. Mondelez and Hyundai might now be fighting for the same Amazon ad inventory to target a suburban family with young children.

So what should non-endemic brands do?

Brands need to challenge their thinking on what Amazon advertising actually is. It’s no longer just a place for consumer product brands. Amazon knows more about our planned and actual purchases than any other company, and that activity can signal other interests. A shopper researching baby gear may be ready to consider a life insurance policy.

Brands need to also skill up on Amazon’s DSP (demand side platform). This programmatic media buying platform has rich audience targeting capabilities like lifestyle segments, in-market audiences, and even your own customers. The options for ad creative warrant investigation too – they are more expansive than you might think.