Perpetua in the News: Josh Golden and Adam Epstein on the Growth of Amazon Advertising
Kristie Schmuck, October 30, 2019
Josh Golden sat down with Perpetua's VP of Growth, Adam Epstein to discuss how Amazon is just getting started with their advertising business and what this means for retailers, brands and agencies.
Full interview transcript:
JG: Hello everyone and welcome to another edition of "In the Hot Seat" where we talk to thought leaders and influencers in the marketing and advertising industry. Today I have with me Adam Epstein, welcome Adam! Tell me a little about Perpetua.
AE: Perpetua is AI powered optimization software for Amazon. We help the world’s smartest brands and agencies win on Amazon by providing incredibly powerful but easy to use software.
JG: So companies come to you and you help them organize to be in one of the sponsored solutions for Amazon?
AE: Correct. Amazon has 4 ad units there are video ads, display ads and these things called Sponsored Ads.
Sponsored ads are in-search, paid search ads within amazon. There are two ad units within it — sponsored brand ads, which appear as banner units at top of search. Sponsored product acts in which anywhere between 60% - 100% of the real estate on a given search is an advertisement.
JG: That’s a lot.
AE: Yeah, you don’t notice them. That’s why these ads are so powerful.
JG: Are people less likely to select a sponsored ad?
AE: It’s not necessarily that. One of the most powerful things of the Amazon marketplace is that 40% of consumers don’t even know they’re seeing an ad. It just really speaks to the power of amazon where if you’re searching for a generic item, an iPhone case, for example. You might see a sponsored ad that has more ratings and a better price point than the one that you were organically searching for.
In that instance, the ad is actually value-added to your shopping experience. That’s why these ads are so powerful, specifically the sponsored ads.
JG: Their earnings are coming out today, right? I think they did really well last year in the advertising business.
AE: It’s $3 billion last quarter. Amazon is on about a $15 billion run-rate for their advertising in 2019. Close to $10 billion of that $15 billion will be on sponsored ads.
So you have this perfect storm of significant amount of money and capital being at stake. So brands that are typically used to spending $10 thousand or $100 thousand per month on Amazon Ads are now spending millions or tens of millions in some instances on amazon ads. So more and more is at stake and they’re realizing they can’t have a junior eComm person managing this because Amazon is one our biggest retailers and we need to be doing the best of the best to win on Amazon.
So not only is there more at stake, but the other thing that is interest to know about amazon ads is that they’re incredibly manually and cumbersome to manage.
Amazon’s ad business effectively grew out of nowhere in the past 5 years. So savvy marketers who are used to Google for 25 years or facebook for 15 years, they come to amazon ads and they’re just like … how do I do this?
Amazon’s not necessarily making it easy to manage these ads, but advertisers are throwing money at it anyways.
The other amazing thing is that, because of Amazon’s closed marketplace, these ads are directly attributable to sales. So you can very easily model ways in which advertising has an effect on your top line and bottom line on Amazon.
To that point, be cause it’s very easy to model, it’s perfectly suited for software. Whereas this isn’t a creative ad, like a billboard and what’s the ROI on this?
Software can create very powerful predictive models of every click leads to Y conversions at this average order value. You can create very simple to use software that runs complicated models that help you win.
JG: Knowing the quantity of work that you’re doing to help these brands, what are you three big insights how to advertise on Amazon?
AE: Rather than talk about the tactical steps that brands are taking, I think it’s important to just say the best brands are going all in on Amazon. If you live in a certain category, at a certain price point and you are a certain brand. Amazon is going to be your biggest channel period. You just need to go all in. What does that entail?
All-in entails using every possible ad unit. So we mentioned sponsored ads, these are bottom of funnel ad units that are paid search. But also employing a full funnel strategy so that your’e using display advertising powered by the Amazon DSP to drive top of funnel brand awareness. Also using other powerful tools provided within the DSP such as Amazon audience data and re-purchasing data to attract re-purchasing behaviour.
For example, let’s look at Coffee beans. If you’re purchasing a product like coffee beans that you’re going to be ordering over and over again, you need to be re-purchasing them. If that coffee brands wants to create loyalty, the way that they do so is by using the DSP to re-purchase via display ads.
The other thing that brands are really starting to figure out is that Amazon is a unique channel that requires a significant allocation of not just capital but Human Resources. So Amazon used to fall within the sales channel, as an example. People are starting to realize this is a media company, that people need to be allocating smart media dollars and smart people at in order to win.
It might fall now under the CMO, but some companies we’ve seen are creating new arms called “retail media arms” that are distinct teams, exclusively focused on Amazon and potentially other channels in the near future.
JG: What’s happening in the near future? Do other retail companies have their own media channels?
AE: Amazon is 50% of all commerce sales in North America. All these other companies are now saying to themselves, "if Amazon can build a 15b media business, why can’t I build a $10 million or $50 million media business"?
Walmart via Walmart Media Group is doing this exact same thing. They are replicating sponsored ads very similar to Amazon, it is nascent, we’re actually in the beta. We’re very excited by the prospect of Walmart doing that as well.
What you're seeing is a lot of these traditional retail companies that are now going digital are realizing they can create a wildly profitable arm of their business by tacking on media as well. Brands and agencies are now becoming used to this because Amazon’s been at the forefront of this for the past 5 years.
JG: Where are they going next?
AE: Amazon likes to say we like to Invent. That’s one of their leadership principles. We’re of the view that $15 billion is nothing for Amazon and that they view eCommerce advertising as a $100 billion dollar market. I think that we’re going to see Amazon continue to invent, leveraging their very rich first-party shopping data to power ad units across digital marketplaces across the board.
I just think that they’re going to continue to deploy capital and resources to re-think the way that we think about shopping and being at the forefront of digital advertising.
JG: In Perpetua’s future, what is your superpower to help make that happen?
AE: I love that you used the word superpower. The mission of our company is to give superpowers to anyone that sells online. We just started with the biggest store in the world and the fasted growing ad platform in the world.
We’re fundamentally of the view that this eCommerce advertising business is going to be a $100 billion business minimum. We want to be at the forefront of that by building very, very powerful but easy to use software tools for brands and agencies to win in this massive, massive market that’s just getting started.
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