Amazon Sponsored Display vs DSP: Key differences in the two Amazon Advertising Types

Every Amazon advertiser is now familiar with both Sponsored Display ads (SD) and Amazon DSP (DSP). Whether you should advertise with either is no longer a question: you should. The ultimate question has become, how should SD and DSP be employed as part of your wider advertising strategy?

At Perpetua, we're following Amazon's lead in making big bets by building products and services to support each of the two. In doing so, we believe we've developed a sound perspective in answering the following questions:

• Is DSP is right for you?

• Is SD is right for you?

• Should SD or DSP be employed in tandem? If so, how?

While we may have strong convictions in answering these questions at the moment, we feel most confident stating that these views will become dated very quickly. Both the SD and DSP products and their available ad inventory will evolve dramatically over the coming months. It is vital that every advertiser monitor that evolution and adjust advertising strategy accordingly.

Is Amazon DSP right for you?

Your monthly spend on Sponsored ads provides a great benchmark for whether or not you should be advertising with Amazon DSP. Generally speaking, we recommend that advertisers who spend at least $10,000 each month on Sponsored ads consider matching that spend with DSP (for a minimum starting budget of $10,000).

This naturally leads into a discussion on media planning across Sponsored ads and DSP. For the sake of brevity, we believe that advertisers should feel comfortable matching ad spend across each. Some of our advertisers spend more on Sponsored ads, and some spend more on DSP. Depending on both performance or advertising strategy, a 1:1 ratio is a simple way to think about media planning.

If you don't spend more than $10,000 on Sponsored ads per month, DSP probably isn't a great fit for you - at the moment. If you do, you should be leveraging DSP to grow your business on Amazon. Here's everything you need to know about Amazon DSP advertising, and an insightful video on best practices.

Is Sponsored Display right for you?

This is a simple answer: Yes.

If you spend less than $10,000 on Sponsored ads, you should be advertising with Sponsored Display. If you spend more than $10,000 on Sponsored ads and are not on DSP - the answer is yes. And, if you spend more than $10,000 on Sponsored ads and are on DSP - the answer remains yes (more on this below).

At the moment (and we're quite sure this will quickly evolve), Sponsored Display (via the advertising API) has two primary advertising strategies: 1) Retargeting, 2) Product Targeting. Each of these tactics should be used by advertisers whether you're using SD or DSP.

Sponsored Display Retargeting

Retargeting works. There's a reason why Amazon introduced retargeting as one of the first strategies for Sponsored Display - they knew it would drive good results for advertisers and could serve as a gateway drug for display advertising.

Whether or not a smaller advertiser should activate retargeting, depends on a number of factors:

• Budget

• Product price and consideration period

If an advertiser is working with very tight budgets and is looking to squeeze as much value as possible with a limited budget, we generally recommend focusing on SP, SB, SBV, and SD product targeting ads. If an advertiser has a more flexible budget, they should absolutely activate SD retargeting. Again, retargeting works - and the results will likely be solid.

Advertisers that should consider retargeting, regardless of budget, are those that have high price point products with long consideration periods. Amazon will be the first to tell you that a customer must see an ad for your product multiple times before purchasing. If a product is >$50, and an advertiser has benchmarks of consideration period data from their ecommerce website, retargeting will be invaluable in following the customer along the purchasing journey.

If an advertiser is unsure if it's right for them, we recommend trying it out. There's no better way to discover its effect on your business than testing. Like all ad units on Amazon, we encourage you not to look at ACOS alone. Monitor the total sales of the products with retargeting turned on and measure total sales growth, with a keen eye in flagging if retargeting is capturing otherwise organic purchasers.

Sponsored Display Product Targeting:

Product Targeting for Sponsored Display really works, and every advertiser should leverage Sponsored Display for this advertising inventory.

We actually recommend that advertisers try not to even consider these as display ads. Sponsored Display product targeting are native ads on the Amazon marketplace, located on invaluable above-the-fold inventory on the product detail page. Similar to search ads, these ads feel less invasive and more organic, and that is why they're effective.

Given their location, an advertiser must now think of defending their product pages the same way they defend branded search. You have to bid on your own ASINs, otherwise your competitors will. A worst-case scenario for any advertiser is bringing a customer to their product page via a search ad, and then having a competitor steal that customer with a SD product targeting ad. Conversely, due to the nascency of these ads, unsavvy advertisers not advertising with SD product targeting leave themselves susceptible to conquesting opportunities - and we've seen a lower ACOS on these ad units than competitor terms on search.

Sponsored Display product targeting is now table stakes on Amazon advertising. Yes, this is yet another move by Amazon to extract more ad spend from its advertisers. But, you have to do it - otherwise your competitors will.

Should SD or DSP be employed in tandem?

Here's where things get interesting.

Amazon is notorious for pitting two teams against each other and seeing who wins. This is exactly what's occurring with the advertising inventory on SD vs. DSP. For advertisers who have activated DSP, this makes determining how, and if, you should leverage both, or either, a difficult question. Hopefully we can provide some clarity.

Retargeting:

We recommend using DSP only for retargeting.

The primary reason we recommend DSP only is that SD retargeting serves ads to your products and products that are similar to yours. Advertisers do not have any control what those other products are, and thus lead to poorer results. With DSP, an advertiser can be very specific serving ads on the exact product the customer initially viewed.

Inventory and placements are also key. DSP ad inventory is both on and off Amazon whereas SD is only off Amazon. We generally see significantly better results on retargeting campaigns when the ad inventory is on Amazon. With DSP, advertisers can also determine whether the retargeting ads appears above and below the fold.

We also feel DSP retargeting gives us controls that mitigate the risk of cannibalizing organic sales. We've seen that without restrictions on serving ads after a consumer views a product page, retargeting metrics may look strong, but organic sales may remain static or in some instances decline. To ensure retargeting focuses on incremental sales, we typically exclude serving ads if a customer viewed the product with in the last 3-5 days without purchasing the product. This can only be done with DSP. Further, audience insights (exclusive to DSP advertisers) provides data on the consideration window of purchasers of that advertiser. We use this data as a guide on when to show the initial retargeting ad, and the frequency with which to do so (another lever unavailable with SD).

Product Targeting:

We thought we'd have the same perspective on product targeting.

First let's clear the air: Sponsored Display product targeting and the contextual targeting line items in the DSP serve ads to the exact same inventory. (see inventory in the image below)

This advertising inventory is incredibly valuable. Prior to this inventory being available for Sponsored Display, roughly a third of all of our advertisers' Sponsored Ad spend and conversions (DSP excluded) occurred on product pages. The ad inventory that drove that amount of spend and conversions had been limited to the Sponsored Product product targeting carousel; and most recently Sponsored Brand product targeting carousels. In both instances, the inventory had been hidden below the fold.

Given our knowledge of the spend and conversion metrics on product pages, when Amazon unlocked above-the-fold inventory for both SD and DSP, we got excited.

Initially, we thought DSP would offer similar advanced controls and thereby better results than SD. We were wrong. In almost all of our initial tests, Sponsored Display product targeting outperformed DSP contextual targeting.

SD outperformed DSP for the very reason that DSP outperforms SD on retargeting: Control. SD product targeting allows you to target specific ASINs (DSP does not). We've also discovered that SD is "retail aware", meaning the ad will automatically stop showing if the product is out of inventory or loses the buy box, whereas DSP is not.

For this reason, we feel confident in stating the following:

• Sponsored Display product targeting is the most assured way to win above-the-fold placements on a product page.

• Every single advertiser should be activating Sponsored Display product targeting.

We still remain bullish on Amazon DSP advertising. DSP betas for inventory on the product page continue to pop up. But for now, we recommend Sponsored Display product targeting.

To reiterate our earlier stance, the only thing that's certain is that our perspective will change as SD and DSP continue to evolve. We're especially intrigued by the potential for new ad inventory on product pages (perhaps exclusive to DSP), and the ability to create custom audiences for SD. This is Amazon of course. Every advertiser must be comfortable with experimentation, and uncertainty. Display advertising with Amazon is the embodiment of both.