Ep 462: Black Friday Insights: Amazon’s Changing Ad Strategies with Pilothouse | AKNF

Summary

DTC Podcast Episode 462: Black Friday Insights: Amazon’s Changing Ad Strategies with Pilothouse | AKNF

Release Date: December 6, 2024
Host/Author: DTC Newsletter and Podcast
Title: Black Friday Insights: Amazon’s Changing Ad Strategies with Pilothouse | AKNF

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1. Early Black Friday Returns and Turkey 12

As the DTC Podcast gears up for the Black Friday rush, hosts Eric, Clifford, and Rob delve into the preliminary performance indicators within the Amazon ecosystem, specifically focusing on "Turkey 12" (T12), Amazon's extended sales period leading up to Black Friday.

Rob Highlights Early Performance:

"[...] We saw some brands really pick up on the first few days of Turkey 12 and that's been really exciting."
— Rob (01:25)

Clifford Adds Nuances:

"[...] customers shouldn't have known that sales were starting. I mean, I guess they've just been starting earlier every year."
— Clifford (02:01)

The team discusses how early sales impacted overall revenue growth, noting that while T12 brought a significant revenue spike, the initial weeks of November saw softer sales compared to previous years. Clifford attributes part of this slowdown to the distractions of the election year, impacting consumer shopping behavior.

Eric’s Insight on Time Allocation:

"It's all a zero-sum game. You can only do really one thing at a time and fret about the election or cheer about the election."
— Eric (03:08)

2. Amazon Marketing Cloud and Ad Strategy Shifts

A substantial portion of the discussion centers around Amazon Marketing Cloud (AMC), its expanded data access for agencies, and the implications of increased data granularity on advertising strategies.

Clifford Raises Critical Questions:

"[...] Amazon is doing weird broad match things with some of these sponsored brand ads where they're going to show you to the word blue running shoes or running shoes or the word Nike."
— Clifford (03:55)

The hosts explore whether the additional data provided by AMC genuinely aids decision-making or serves as a mechanism for Amazon to encourage increased ad spending. Clifford expresses skepticism about the trustworthiness of AMC data, suggesting that broader targeting may not align with advertisers' specific campaign goals.

Eric on Targeting and Costs:

"The more you target, the more the price goes up."
— Eric (05:50)

Rob emphasizes the challenges of data specificity, noting that broader match types can obscure the effectiveness of campaigns by blending branded and generic term performances.

Rob on Data Specificity:

"[...] you have these branded terms. For example, mixing with a generic campaign, once that does, you now have a blended generic and branded ROAS on that campaign."
— Rob (08:17)

3. Introduction to Amazon Hall

The conversation shifts to Amazon Hall, Amazon's venture into the low-cost merchandise market, positioning it as a competitor to platforms like Temu and Shein.

Rob Explains Amazon Hall:

"It's primarily fulfilled from like direct from China I believe and it's mostly low cost items."
— Rob (10:21)

Clifford discusses the potential impact of Amazon Hall on brand perception, with concerns that it may dilute Amazon's premium image by associating it with lower-quality, budget-friendly products.

Clifford on Brand Impact:

"[...] there's a lot of people who had advised and said like you'll see a lot of conversation about Amazon shouldn't have done this because it cheapens their brand as a whole."
— Clifford (10:49)

4. AI in Amazon Advertising Tools

A critical examination of AI-driven tools in Amazon's advertising ecosystem features prominently, with Clifford and Eric expressing doubts about their efficacy.

Rob on AI Tool Scams:

"They were running like they were basically taking money, promising that they would launch your brand on Amazon, like help you find a product, help you to launch."
— Rob (16:22)

Clifford elaborates on the limitations of AI in managing Amazon PPC campaigns, arguing that much of the touted AI functionality is either misleading or unnecessary for effective campaign management.

Clifford on AI Limitations:

"[...] it's basic algebra, not even basic arithmetic. There's a little bit of human intuition that helps and looking at what keywords are important or less important..."
— Clifford (17:17)

Eric concurs, emphasizing the value of human oversight over reliance on purported AI solutions.

Eric’s Take on AI Hype:

"Human intelligence over artificial intelligence for now."
— Eric (19:56)

5. Black Friday and Cyber Monday Predictions

Concluding the episode, the hosts share their perspectives on the upcoming Black Friday and Cyber Monday events, considering factors like affordability pressures and Amazon's consistent performance.

Rob’s Optimism:

"I think it's going to do well. I think when you do have affordability pressure, you put pressure on, like, actually shopping bigger discounts and bigger sales days."
— Rob (20:39)

Clifford’s Confidence in Amazon:

"Amazon always comes through on Black Friday. [...] I have faith in their insane amount of marketing spend."
— Clifford (21:05)

They acknowledge the challenge of maintaining profitability while offering significant discounts but remain bullish on Amazon's ability to drive substantial sales through its extensive marketing strategies.

6. Additional Insights and Closing Remarks

The hosts touch upon recent developments, such as Amazon's announcement of no new fees in 2025, which they approach with cautious optimism, referencing historical precedents like political promises.

Rob on Amazon’s Fee Announcement:

"They did so many fee changes and increases and a few decreases last year that they're just saying no new fees this year."
— Rob (15:39)

Finally, they discuss the Ascend E-Commerce scam, highlighting the importance of vigilance against fraudulent platforms that exploit the promise of AI and Amazon expertise to defraud sellers.

Rob on E-Com Scam:

"[...] they're using cutting edge AI powered tools that would help consumers earn quickly thousands of dollars in passive income. They did none of that. They just took people's money and ran away with it."
— Rob (16:22)

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Conclusion

Episode 462 of the DTC Podcast offers an in-depth analysis of Amazon's evolving advertising strategies in the lead-up to Black Friday, the implications of expanded data access through Amazon Marketing Cloud, and the introduction of Amazon Hall. The hosts provide critical insights into the challenges and opportunities facing direct-to-consumer brands on Amazon, particularly concerning ad spend optimization and the integration of AI tools. Their optimistic outlook on Amazon's Black Friday performance is tempered with cautionary notes on market dynamics and the importance of maintaining data specificity for effective marketing campaigns.

Listeners gain valuable perspectives on navigating Amazon's complex advertising landscape, preparing for major sales events, and safeguarding their brands against emerging challenges in the e-commerce space.

Transcript

[Clifford]

This is a big, big topic. Amazon Marketing Cloud. Amazon Marketing Cloud gives agencies or software providers access to more data. But is more data a good thing? Or is more data a way that Amazon is influencing you to spend more? Amazon's making things broader. You would target red running shoes with a sponsored brand video or headline ad. Your headline says red in it. Your shoes are all red. The picture you use is red. Now, even though you're targeting the word red running shoes, Amazon is doing weird broad match things with some of these sponsored brand ads where they're going to show you to the word blue running shoes or running shoes or the word Nike. And they're doing it without really telling you. If you don't pay attention to your search terms.

[Eric]

It's all killer, no filler. I'm Eric, this is the D2C podcast and we are basically on the eve of Black Friday here. Wednesday, November 27th. This is going to come out next week in the aftermath aftermath of Black Friday. I'm here with Clifford and Rob from our Pilothouse's Amazon team and we've got a few topics to discuss today in the Amazon world. The first one is sort of the early returns we're seeing on Black Friday in the Amazon ecosystem, which we are referring to as Turkey 12, I believe. So what are our early returns on Turkey 12?

[Rob]

Good old Turkey 12. Cliff can definitely add more of the details here, but seeing strong performance. We saw some brands really pick up on the first few days of Turkey 12 and that's been really exciting. It does lead to some speculation as to are we going to see similar multiples of revenue growth from pre Black Friday to actual Black Friday and Cyber Monday, or are we going to see a lower multiple which means the sales has just been spread over more days. Excited to see how that performs over the weekend. Yeah, so that's been it so far. But Cliff, you want to add anything to that?

[Clifford]

Yeah, I think we also saw which is this is a weird one because customers shouldn't have known that sales were starting. I mean, I guess they've just been starting earlier every year. So maybe they customers do wait more now, but first couple weeks of November before T12 started did seem softer across a lot of brands than we've seen in the past. And that of course is made up for once the T12 sale started and sales popped up. But year over year it doesn't look incredibly stronger because of the sale, because the sales were softer in the beginning of the month and now you're running them at a lower margin. So yes, A big overall revenue pickup once the sale started. But the beginning of the month was relatively slower than we've seen in the past. Now, this is an election year and that was a lot of attention in the beginning of the month. Client mentioned this the other day. Just the election as a whole and the attention it took in the country might have actually just reduced shopping, online shopping for a little bit at the beginning of the month. There when it might have attention is.

[Eric]

A zero sum game. You can only do really one thing at a time and fret about the election or cheer about the election. Yeah, it could be, could take up that time. I love that we're trying to make turkey time a thing or Turkey 12a thing. And now we're already changing it to T12. So that's how, you know, it's really locking in there if we're like skipping turkey and just going T12. So our next point that you wanted to discuss here, Clifford, and I think, because we'll do a retrospective also, like, we'll actually, we'll do a more, we'll dig out a more active retrospective a couple weeks after, during December, I'm sure, where we'll talk about like the full, the full breakdown on Black Friday Cyber Monday across the pilot House ecosystem. But what's this topic you have to discuss today, Clifford, about Amazon trying to make us make ads do something that we don't want them to do. What do you, what do you mean by this?

[Clifford]

Yeah, so this is a big, big topic that's been in the Amazon space for, since basically unboxed about a month ago in Austin, Texas. Amazon had their big ad event and they announced a whole bunch of new things around Amazon Marketing Cloud. Amazon Marketing Cloud gives you. Gives agencies or software providers and API access people access to more data, more data on your Amazon marketing activities. But is more data a good thing or is more data a way that Amazon is telling you or influencing you to spend more? And some of the anecdotes I've heard on this have been, well, I have this keyword that hasn't converted on 70, $80 in spend. But I looked at Amazon Marketing Cloud and it looks like it's influencing these other sales downstream and things like this. So there is like a trustworthiness to this type of data and not just the data itself, but just the entire concept of them bringing in more like audience data and audience targeting and these kind of things that all sound good, they sound pretty, they sound exciting, they sound fun. Way more data, that's great, but something we always Come back to is, does that actually affect your decision making at all? If you're advertising the red running shoe, is there a specific audience of people who specifically searched for red running shoes that you don't want to be advertising to? Is that really a thing? Because they're specifically searching for your product. So a lot of the time, the marketing cloud type of things, those extra data analytics like Amazon's not putting this stuff out because they make less money, they're putting it out to make more money, which means you're paying more for ads in the end.

[Eric]

And that's the way it works. The more you target, the more the price goes up. Right? The more you narrow target on any of these other platforms, the more the price goes up.

[Clifford]

Yeah, the more that price is going to go up and the more like it's just going to cause you to advertise more like it's going to say, well actually that $100 that you thought was wasted and in the past you might have cut back on, now look at it, it might be influencing this other thing. So maybe keep spending over there but look like a waste. And I think a lot of that's starting, starting to happen. But then rolling out outside of the Amazon marketing cloud data, Amazon's making things broader, broader match types and not even just match types themselves. Campaigns that used to be you would target same example, you would target red running shoes with a sponsored brand video or headline ad specifically advertising your red running shoes. We've talked about it on the podcast before of having a headline that matches have a store page that matches. All of it's going to the same thing. Your headline says red in it. Your shoes are all red. The picture you use is red. Really red going to your red running shoes store page. It's all really linked, tied together. Now, even though you're targeting the word red running shoes, Amazon is doing weird broad match things with some of these sponsored brand ads where they're going to show you to the word blue running shoes or running shoes or the word Nike. And anything that they deem as related to red running shoes, they're now hitting in that campaign and they're doing it without really telling you if you don't pay attention to your search terms. So people who are just looking at top level campaign metrics are going to see a lot of the time roas increasing, spend increasing, think that they're crushing it on this red running shoe campaign that they made. And then look at your search terms and it turns out no, you were actually matching on like A branded term maybe that got pushed in there for some reason or some competitor term or something completely different that was outside of what you intentioned with that campaign in the first place. And they're doing this across different campaign types. So there's that side, there's product targeting stuff that's hitting weird things and there's a lot of leak through of your branded terms being targeted when you're not trying to target them, you're specifically even negating them in some cases. And they're still getting hit by some of these ad types as Amazon tries to find ways to squeeze out a little bit more money out of their.

[Eric]

Advertisers because they are in the same audience type or whatever that they have dictated. That's it's really interesting because you'd think you're getting, with more audience targeting you'll get better conversion rates because you're going to get more and more specific. But it sounds like with the way they're doing it, it's actually to get you more scale by borrowing from other keyword matches or things like that.

[Rob]

The unfortunate impact there is the lack of specificity on data. So as Amazon goes broader and broader with that, you have these branded terms. For example, mixing with a generic campaign, once that does, you now have a blended generic and branded roas on that campaign. So while it might look good, it's not actually as good as it is because those branded sales, and we've talked about this before, aren't a high value sale. Do you want to defend your branded terms? Yes. Are they driving net new customers and actually contributing to long term growth? No. You're capturing a brand aware customer. Are generic terms contributing to growth and capturing net new and actually building rank and relevance?

[Clifford]

Yes.

[Rob]

So you want to look at ROAS and those terms differently. You want to look at roas on each one of your prospecting terms differently based on what's going to be the payoff once you do rank. So without that level of specificity and insight, you get muddy data and then it's hard to make clear, concise, actionable decisions to actually move towards better performance.

[Eric]

I love it. That's such a classic media buyer stance. It's just like watch these platforms because they're always trying to find new ways to get you to spend more money. That's why you got to work with Pilot, because we're just, we're watching that like a goddamn hawk.

[Rob]

They make it so easy to spend.

[Clifford]

Yeah, yeah.

[Rob]

They make it hard to get results.

[Eric]

That's funny. That's what Amazon does for everyone. My I've been logging into my girlfriend's prime account and so I to watch some shows with her and so sometimes it's up and I see just the amount of like cart fill ups that she's doing. I'm like man, digital marketers hate you. You just fill up carts all over the place.

[Rob]

It's Black Friday week. You can fill it up before and then you just check out on Black Friday once the final discounts hit, you.

[Eric]

Know that's the way to do it. And that leads us into Amazon Hall. What. What is Amazon hall actually even heard about this? I think I know what it means from, from the, from the words.

[Rob]

Yeah. So it's Amazon's like a low cost Temu and Shine competitor. So it's primarily fulfilled from like direct from China I believe and it's mostly low cost items. So they're not offering the same sort of like prime level shipping. Like shipping is going to be like one to two weeks similar to Team Moonshine. But it's like an opportunity to get those low, low priced items and an opportunity for mark or for. For brands to sell those direct.

[Eric]

Interesting. Do we have any, do we have anything running in Amazon Hall? We do not, we do not know.

[Clifford]

I guess not directly from. From everything we saw on. When they were first talking about rolling it out and then rolling it out it is directly Chinese based companies and manufacturer that is like featured in this whole platform. Like it's. There was specifically like invite only and Amazon was basically like in China inviting brands or it's. I wouldn't even call it brands on what's on Amazon hall but inviting manufacturers to join the platform. It's like I don't know like there's a. There's a lot of people who had advised and said like you'll see a lot of conversation about Amazon shouldn't have done this because it cheapens their brand as a whole and like let Temu and shein and AliExpress in the past compete for that piece of the market and don't dabble in it because you're going to cheapen your brand and they have separated it in its own section on the app. But it looks crappy. It doesn't look good.

[Eric]

No wonder.

[Rob]

This makes me think of my dirty dropshipping days and I wonder if there's anybody who's just like now drop shipping from Amazon hall instead of like AliExpress. Bet it's happening. Go.

[Eric]

I bet it's happening for sure. Well just more lower end competition so just Keep pumping out high product results and high quality products and stay away from the haul for now if you're in the audience, probably. And also we were just talking about this too. Like what, what is Amazon hall gonna be like in 2025 if you know Trump follows through on his tariffs, everything. It's not gonna be such a great deal in that case because you're gonna be marketing it up 40% or more.

[Rob]

Yeah, it's gonna be interesting to see the impact of that for sure because like Amazon, like not even Amazon hall, but like Amazon proper is, does have a lot of brands who are importing from China and if that increases their cost then are we going to see those brands disappear because they can't make a profit? Are we going to see them just increase price and then try and compete with like will be more priced closer in price till they're made in the US counterparts but selling a potentially like less or lesser quality product for now much like similar price where before you could save on you might sacrifice quality for cost. So yeah, interesting to see what might happen there.

[Eric]

What was your point about Amazon sellers being better positioned especially Amazon sellers here in the US being better positioned to pivot during if tariffs come into play? Clifford?

[Clifford]

Yeah, we work with because we're obviously North American based and mostly in Canada, but we work with majority US Brands and a good chunk of them do make their products in the US or at least some components or some part of their catalog are made in the US And I think the big difference that you'll find on Amazon compared to other, you know, if you have your own Shopify site, you go to someone's Shopify site, it's only their products. The price is the price. There's no competition around them on Amazon you're a marketplace. So almost everything you're going to find on Amazon has a direct from China competitor right beside it in the top rankings of almost every category. Obviously in something like earbuds or something like that, it's majority. But even in grocery items there's a lot that are in beauty, for example, there's a lot of these categories that there is a big US brand US based, sometimes manufactured in China and then there's a Chinese based brand right beside it that's like $5 cheaper. Now that Chinese based brand one might be higher priced and like Rob mentioned, the ones that are US made might now have a huge advantage because they come out ahead or even those brands that are US brands and currently sourcing from China might just be a like have an advantage in finding an American supply chain that would increase their price a little. But because they're going to be more competitive with the Chinese sellers that are beside them, they actually come out ahead. So I think, like on the whole, I think US Sellers will come out ahead. Customers probably lose. Like, I think in the end everything is going to be more expensive. Like, so that kind of sucks. But I do think US sellers going into it have an advantage overall if everything gets more expensive. US sellers have an advantage for sure.

[Rob]

On that note, buy everything this week. Black Friday, Cyber Monday. Don't wait. Tariffs are going to hit next year.

[Eric]

That's right.

[Rob]

Bye now.

[Eric]

Bye now. Make it the biggest Black Friday ever. Super cool. And other good news we have here. Amazon has announced there'll be no new Amazon fees in 2025. Read my lips. No new fees.

[Rob]

No new fees. And they will not increase U.S. referral and FBA fees. They did so many fee changes and increases and a few decreases last year that they're just saying no new fees this year. I will believe it when I see it. But it is a nice announce that.

[Eric]

They made, I believe that famous line from like George Bush, read my lips, no new taxes. I think he did in fact introduce taxes. So I. You can't always trust these proclamations.

[Rob]

No, definitely not.

[Eric]

Other news we have here. I don't even know what this, what is the Ascend E Com scam? I love calling out scammers. Well, how did they scam?

[Rob]

They were running like they were basically taking money, promising that they would launch your brand on Amazon, like help you find a product, help you to launch. And they were using cutting edge AI powered tools that would help consumers earn quickly thousands of dollars in passive income. They did none of that. They just took people's money and ran away with it. I think it's, they defrauded customers of like at least 25 million. And yeah, the FTC is after them now. So always interesting news when, when these companies pop up. I found this one particularly interesting because we see so many tools out there, especially over the last year that just tout like cutting edge AI features and a lot of them aren't really using true, true AI as Clifford as this is a Clifford point. Clifford's made to me many, many times. So yeah, it's just interesting to see one actually come through as a, as a full, full scam.

[Clifford]

Yeah, I love, I love this topic because there is like massive, massive Amazon software companies that AI is like on the front of their homepage of all of the amazing things they're doing with AI and I did some work in AI in the past, in the past life and it's not one you don't need AI to manage. Amazon well, I mean ChatGPT is kind of nice to help write your listings, but for managing your PPC campaigns, it's not rocket science, it's basic algebra, not even basic arithmetic. There's a little bit of human intuition that helps and looking at what keywords are important or less important and looking at total sales on them, but there's nothing that AI like, there's not enough data, there's not like huge amounts of data on everything that you're going to be able to leverage AI to make incredible groundbreaking decisions. It's just not necessary. Which means all these people that say they're using AI, they're probably not. It's probably just doing the same simple arithmetic that the large majority of other bid optimization algorithms are doing. It just takes your target a costs, it takes your cost per click and the revenue you're getting per click and it's doing the math to figure out what a good target bid would be and it's slowly moving your bid towards that bid. That's it. It's not super complicated. So all this AI is just like a lot of nonsense.

[Eric]

The AI just says it's game changing. It's just because that's what AI loves to throw in the word, the term game change. This is going to change the as soon as you hear that it's like, okay, well that's fake AI and Amazon's.

[Clifford]

Rolled out a lot of AI. We've tried some of these AI tools. They're usually garbage, like straight up, like bad suggestions, like, oh, do you want to add to your bullet point on your product that it's a powder? It's like it's not a powder at all. That's not even close to what it is. Where'd you even get this from? So most of them are pretty bad. And then a lot of these full serve AI advertising platforms for Amazon are like not only making new keyword suggestions, they're spending your money on them. Like there's like, if you're not looking at it, they're literally adding new keywords to campaigns and then spending your money on them. And if you were to go look at it as a human, you'd be like, of course I don't want to spend on that word. But the AI doesn't know that and it thinks, well, this got a good click through rate so we're going to spend hundreds of dollars on it and then you waste a ton of money. It's just, it's just so unnecessary. And a lot of the time it's like, if you were to pay like a monkey to look at the campaign, they would do a better job. So.

[Eric]

So human intelligence over artificial intelligence for now. Watch this space for now. For now. Clifford intelligence above artificial intelligence. I think it's a good shout. I think it's easy to get sucked into, you know, the, the next big thing here. And it. And, and it obviously, like you say, it's just, it is a way for, for these platforms to try to make more money from people that aren't really paying attention in a lot of cases. So pay attention. Sweet. Well, thanks, guys. Just, overall, what's your feeling on Black Friday Cyber Monday this year? I think there's, like, there's a feeling like there's a bit of an affordability crisis out there, but people. But like, what, what are, what, what are. Like, what are your vibes? Vibe checks on this year's Black Friday Cyber Monday for competing with last year's, for instance.

[Rob]

I got good vibes. I think, like, I think it's going to do well. I think when you do have affordability pressure, you put pressure on, like, actually shopping bigger discounts and bigger sales days. On that same vein, you've got profitability focus from brands, so you've got some brands not maybe leaning as heavy into, like, big, big, big discounts because they're trying to remain, like, profitable while achieving that growth. So a bit of the balance of the two.

[Clifford]

Amazon always comes through on Black Friday. That's my thought as well. Is that like. Yes, yes. T12 started early. Yes. Is it more spread out? Maybe. Would that reduce how many customers are available for your brand to buy your stuff on Black Friday proper rather than because they bought it four days earlier? Maybe. But I swear Amazon always comes through on Black Friday and somehow every year is a bigger spike than the year prior. Somehow. And I don't know how they keep doing it, but they keep growing it. And I have faith in their insane amount of marketing spend and how many phones that they're on and the push notifications that will get people to come back to the platform and spend their money. So I'm always pretty bullish on Black Friday being a huge day. And I think today or this year won't disappoint either.

[Eric]

Well, let's leave it there. Everyone enjoy their tea, their turkeys, and we will do a retrospective next time we talk. Thanks, guys.

[Clifford]

Thanks, Eric.

[Eric]

Thanks for listening to today's episode. If you're not getting the D2C newsletter, you can subscribe for free at directoconsumer co. And if you want to learn more about Pilothouse's All Killer no filler services, take off to Pilothouse Co. I'm Eric Dick and this has been the D2C podcast. We'll see you next time.