According to Pacvue, an ad management platform for Amazon, the cost per click of advertising on Amazon was up 23% on Prime Day, year-over-year. This is a very big deal for several reasons. Most obviously, it means that more advertisers are competing for good slots. That’s good news for Amazon, which has dramatically increased ad inventory in the past 4-5 years, but this means that much more inventory hasn’t even kept up with demand.
Increased prices also reflect seller desperation: it’s increasingly mandatory to advertise in order to be seen on Amazon, and to have a chance of winning the Buy Box. No ads = less visibility = worse placement on the search results page = fewer customers = worse rankings = even less visibility etc. etc. . It’s a disastrous spiral. This confirms that Amazon.
Unbelievably, this also means that Amazon’s margins on advertising are also up. In 2019, operating margin in advertising was about 81%,* where it’s been for the past few years (more or less). High prices will drive much higher advertising revenues, as the number of Amazon searches (i.e. inventory) continues to grow as well. We can expect ad revenues to grow by at least 40% in 2020, while margins will climb as most costs are fixed not variable.
This also strongly suggests that Amazon is happy with its advertising cash gusher, and will continue to risk customer pushback against seriously degraded search results. After all, there is no real competition for either Amazon Retail or the Amazon Marketplace.
See Chapter 8 of my upcoming book, Behemoth, Amazon Rising: Power and Seduction in the Age of Amazon