by

Laurie Sullivan , Staff Writer @lauriesullivan, February 14, 2018

Forrester estimates Amazon made nearly $2.5 billion from advertising in 2017, up from an estimated $1.6 billion in 2016. Amazon reports that its merchant partners program accounted for 50% of all unit sales on the site. With that type of clout, analyst and lead writer James McQuivey believes every brand and retailer will need to advertise on Amazon to broaden their reach to consumers.

Agencies Publicis and Omnicom have announced that they will increase ad spend on Amazon by between 40% and 100%, respectively, in 2018, pushing Forrester’s ad revenue estimate to more than $6 billion, McQuivey wrote.

Forrester’s report — Amazon Will Own Your Customer In the Future — details what CMOs, marketers and advertisers can learn from Amazon. The author, McQuivey, believes Amazon will continue to make Alexa, the company’s artificial intelligence platform, more intelligent and anticipatory. He believes the technology and service will make Amazon not just the first, but the only brand some customers will think about when needed to solve daily problems.

McQuivey writes in the research report that during the past 20 years, Amazon created an “ecosphere — a closed experience environment, inside which it places its millions of customers who have little need to look outside that ecosphere to have their needs met.”

Amazon build its relationships on frequency, emotion, and convenience. On average, Amazon Prime members buy on Amazon once every six days, and 59% of Amazon Echo owners use it at least daily.

McQuivey estimates Amazon Prime customers comprise about 47% of the U.S. online population.

Among those who have been Prime members for three or more years, 79% trust Amazon to treat them like a valued customer. Two-thirds of non-Prime Amazon customers say the same. Some 83% of Prime members say “Amazon is the first place” they look when they shop online, and 62% of non-Prime Amazon shoppers say the same.

The model invites customers to build a relationship on one category of items such as books, and then entices them through searches and clicks to explore other possible categories such as streaming movies.

“Prime customers report buying products across an average of 4.3 categories in a typical year,” McQuivey wrote.

And even as options and benefits expand, Amazon finds a way to become not just a frequent, but also an exclusive, provider of services.

The most recent product and service category is medical supplies.

Prime members, with three or more years invested in the relationship, do less comparison shopping than newer Prime members, meaning that they shop at fewer other retailers and visit fewer websites.

What are your plans for an ad strategy on Amazon?

MediaPost.com: Search Marketing Daily

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