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Ecommerce Advertising: No Greener Pastures

Amazon's Q4 report came out recently and a few interesting implications as it relates to the entire ecommerce marketplace.

First, was that their total revenue was up over 9% but total product revenue was down by 2%, so where is that 11% gap coming from? AWS and advertising, which combined makes up for the other half of their total revenue (the other half being from sales revenue). Both AWS and ad revenue were both up 20%. So think about that. Ad revenue up, total sales revenue down. Why?

Scenario #1 could be that bigger brands are pulling out and going elsewhere to sell their products, and they don't do much advertising, but they do make up a very large portion of the total revenue Amazon sees.

Scenario #2 could be that there's an increase of companies selling their products and paying to advertise, but there's only a finite number of customers and dollars they're willing to spend. So, doesn't matter how much you advertise, you can't get them to buy more. Steeper competition, more ad spend, lower margins for the advertisers, and no increase in sales.

But, the other thing I'm hearing is that many brands are starting to branch out from selling exclusively in the US and moving into Europe looking for greener pastures. If this is the case, then I'm leaning more towards Scenario #2 which means more expensive competition, and unfortunately, these advertisers are going to realize, those European pastures aren't as green as they hope they are.

There are a ton of implications, and with those, plenty of opportunities for brands. Check out the video for more.


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