Can Advertising with Amazon Lead to Amazing Results?

Have you ever gone online and not seen a single ad or pop-up window? Hardly. Online advertising has become an essential attribute of the Internet. Most of the ads we see (yes, those text boxes on the majority of websites or the ones that appear on the bottom of most YouTube videos) are powered by Google AdWords. Facebook and Twitter launch the “Buy” button; I wonder how many peopled have tried it out already? And, of course, Amazon wants to get its share of advertisement dollars. A couple of weeks ago, Wall Street Journal reported that Amazon plans to launch its own ad placement platform, Sponsored Links, later this year.

It would be wrong not to mention that Amazon already has a couple of advertising options, such as Amazon Product Ads, Amazon Media Group, and Amazon Local, so why would it spend millions of dollars on new software development? Until now, Amazon was one of Google’s biggest ad buyers, meaning the online retailer’s expenses turned into its competitor’s revenue.

What exactly is the Sponsored Links platform?

Amazon defines Sponsored Links as “advertisements related to your recent product search query or content on the page [that] are always clearly labeled.” According to Forbes, Amazon Sponsored Links will work similar to Google’s AdWords, which is based on keywords data that makes advertisement targeting quite precise. In addition to that, advertisement agencies would be able to buy ads in bulk for numerous clients. Based on the information gathered from millions of its customers, Amazon Sponsored Links will have the ability to target the right ad to the right audience at the right time and in the right context.

Is the new direction too risky for Amazon?

Critics have mixed feelings. On one hand, Google has a more-than-a-decade head start in the online advertising business and development, and it would be hard to compete with the industry leader. On the other hand, Amazon has a great advantage – valuable data on millions of shoppers. Over the years it has collected a vast database of transactions, search, demographic and personal information about its customers. Neither Google, nor Facebook could possibly have such information. When you visit Amazon.com, the system knows what items you looked up before and, more importantly, what you ended up buying. Amazon has an opportunity to make sponsored ads better targeted than ones from Google; it can make ads more “click-worthy” for shoppers, and therefore give a better value for advertisers.

Currently, Amazon Sponsored Links is still in the development stage, so the most important questions remain unanswered. Can Amazon use its information advantage effectively to compete with Google? Will the ads be relevant enough to reach their targeted audience? If you were a business owner, would you entrust your advertising dollars to Amazon rather than Google?

Testing Advertising Metrics

KISSmetrics has a good blog post introducing 8 fundamental principles of profitable direct response advertising and how they apply to online advertising. If you’re in business or thinking about being in business the entire post is a must read! But…

If you only took away 1 principle of direct response advertising:

TEST EVERYTHING!

Knowing nothing else about advertising, if you followed the principle of testing every component of your advertising, you would eventually learn all the other principles anyway. The ability to test is what makes online advertising so effective.

Over a century before the internet, testing is also what made direct response print advertising effective. Direct Response advertising, for the unaware is any advertising where the prospective customer is directed to respond to the advertising in a specific way. In cave-man days this might mean filling out a form and mailing it in, clipping a coupon and bringing it to a store, or calling a telephone number for more information.

What savvy direct response marketers realized was that they had much more control over their advertising results when they tested and tracked their results. The one way to test for ad effectiveness was to deliver a CTA (call to action) that directed the customer to act in a way where their response could be measured. Therefore, if they paid for ten thousand ad placements in which they told their customers to mail in a form for more information, and they received 200 forms in the mail they now knew their response rate for that specific advertisement at that time, to that market was 2% (200 / 10,000).

They could then test different ad headlines, body copy, graphics, and CTAs. If they changed a headline and their response rate improved .3% they had proof it was a better headline and would start testing that ad in larger circulation while testing newer ads in smaller circulation.

The reason the internet is such a disruptive technology in advertising is because online advertising is direct response advertising on steroids. It offers instant feedback, and the opportunity to test countless metrics in highly targeted market segments.

As you learn about various online advertising platforms, frankly, all the charts, graphs and data can be a little overwhelming. Which metrics matter more? KISSmetrics reminds us:

“Many marketers are unduly concerned with ‘building brand recognition’, ‘increasing customer awareness’, ‘leveraging social media’ and all these other fancy marketing techniques...If you haven’t got a clear idea of how a given marketing technique will help you make more sales, don’t use it. If you’re already using it, stop immediately. On the other hand, if you do have a clear idea but lack any way to measure your success, find a way before continuing.”

In short, whatever you measure, make sure it translates into sales!

For example, you’ll hear a lot of talk in online advertising about CTR (Click-thru-rate). CTR is the percentage of people who were showed an advertisement that also clicked on it. Obviously, if you’re advertising widgets and someone clicks on your ad and is taken to your online store, then that can translate to a sale. There is a necessary relationship between the customer clicking the ad and eventually buying from you, so if you improved your CTR then you should increase your sales, so you should measure your CTR.

Another metric you’ll hear a lot about in online and offline advertising is CR (Conversion Rate). CR is the percentage of prospects who take a specific action. At its simplest CR measures involvement through activity. But most often that activity is buying something, though it doesn't necessarily have to be. Again, whatever it is it should naturally translate into an eventual sale, otherwise it’s unnecessary.

Keeping these core principles in mind in all your advertising will help you take measurable advantage of the array of modern information technology online designed to help you get and keep more customers.

Advertising Vs. Marketing

Before you can execute a successful online advertising campaign you have to understand what advertising is and what it isn't. Many people confuse advertising and marketing, assuming they’re essentially two different words for the same thing. While advertising and marketing do overlap, it is critical to the success of any business in the long run to have a solid grasp on the important differences between the two functions.

What is Marketing?

The AMA’s widely accepted definition of marketing defines it as:

...the activity set of institutions and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

If that sounds like a mouth full it is. Marketing is the broad systematic function within every business responsible for developing product and service ideas, researching the validity of those ideas, designing their final form, pricing those products and services, communicating them to the potential customers, and facilitating the exchange of those products and services with customers. Marketing also includes, developing efficient supply chains and effective customer & support programs.

One of the many functions of marketing includes promotions. Promotions are also commonly confused with advertising, but again aren't exactly the same. Promotions are broadly any effort to communicate an offering to a market. This includes, Public Relations, Telemarketing, Web Pages, Brochures, and drum roll….

Advertising!

What is Advertising?

According to the AMA, advertising is the placement of any persuasive message placed in the mass media in paid or donated time or space by an identified entity.

For example, an advertisement would be a spot on television or a spread in a magazine (Mass Media) that had been paid for by a person or organization (or on behalf of a person or organization) that is clearly identified in the ad.

Advertising is merely a single piece of the broader promotional process which itself is a single piece of the broader marketing process. So all advertising is marketing, but not all marketing is advertising. See… Big difference.

Online it can take a little practice to distinguish between the two. For example, a Facebook page may promote a brand, but it is not by definition an advertisement since the space is not paid for by the company that created it. Instead, it’s merely a promotional tool. However, the strip of pictures running down the right side of the Facebook page are advertisements because they are paid and identifiable placements.

It’s important to not confuse what is meant by “paid”. While a company may “pay” a great deal for the design and management of a Facebook page it is not paying for the space (the page itself) and that’s required if we’re to consider it advertising. Even if the page was owned by the company it wouldn't count because the price they pay is not tied directly to time and space. That is, a company webpage can be as long or short as it desires and can exist indefinitely. Advertisements have a specific predefined cost associated with where and when they are displayed.

Now that you know the difference between marketing and advertising you can truly begin your journey to developing powerful online advertising campaigns.

Hello World of Online Advertising and Information Systems

A popular quote attributed to the nineteenth century retailer, John Wanamaker, is “Half my advertising is wasted; I just don't know which half." In a century and a half not much as changed. It’s a familiar problem for advertisers to this day. How do you accurately account for your advertising? First, what metrics are meaningful? Second, how do you accurately measure those metrics?

It’s easy to dismiss Wanamaker’s dilemma as dated. After all, today, thanks to modern technology, advertisers have access to more data than they know what to do with. That’s the problem. We live in a “data-driven” world. We buzz about “big data” and “data mining”. We’re inundated with “data” and nowhere is that truer than online. But we often loose sight of the fact that data on its own is nothing more than a liability until it’s transformed into meaningful information. The function of an information system is to perform that transformation. In the case of advertising, information systems tell us which headlines generate the most interest, lead to the most sales per dollar of ad expenditure, and attract the customers with the highest lifetime value. Information systems can even automatically adjust ad campaigns in response to certain data. But the question remains; how do you accurately account for your advertising?

The purpose of this blog is to explore the connection between information and online advertising in order to gain meaningful insight into how online advertising can be made more accountable and ultimately more profitable. Along the way we hope to shine a light on the frontier of possibility in online advertising as well. For better or worse, we live at a time when the average business owner has unlimited access to data. However, this data can only be transformed into a valuable asset when gathered in the context of a well-defined value oriented strategy.

This process must be practical. In this modern technology driven era, there is no shortage of bright minds who can find a vast array of uses for this data. A large corporation may use online advertising as part of a much larger marketing mix. A new small business may use online advertising as its primary marketing channel. Therefore, this blog ultimately aims to explore the role of information systems in online advertising in a way that is actionable for its readers-aspiring entrepreneurs and small business owners.

We hope this blog can serve as a forum where you, the reader, can discover information about online advertising that pertains to your needs and interests. Are you interested in learning more about a specific online advertising platform such as Google Adwords, Google Maps, YouTube, Facebook, or Twitter? Or would you rather learn more about the various third-party software tools that help coordinate a dynamic online advertising campaign? Or perhaps you’d just like an answer to your single biggest online advertising question. Let us know what you’d like us to cover in more depth in the comments below. We look forward to seeing what’s on your mind.