Pacvue Releases Report On Amazon’s Q2 Ad Growth During COVID-19
The Q2 2020 CPC Report: Amazon Ad Growth Through an Uncertain Market unveils that even with COVID-19 still affecting US spending habits and the overall economy, return-on-ad-spend and ad budgets increased significantly during Q2 2020.
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Amazon Ad Growth - Key Findings:
- Amazon CPCs dropped in April and May, mainly due to the pandemic, and Amazon delayed shipment on non-essential categories.
- The firm's CPCs rebounded in June to near pre-COVID-19 levels.
- Out-of-stock products, shipping delays, and other complexities caused budget uncertainty.
- Sponsored Brand return on ad spend (ROAS) overtook Sponsored Product ROAS for the first time.
With COVID-19 still affecting US spending habits and the overall economy, Q2 of 2020 saw fluctuations in the costs and strategies for advertising on Amazon. Despite lower cost-per-clicks (CPCs) and budget uncertainties, ROAS and advertising budgets increased significantly.
The overall drop in CPCs in Q2 can be clearly seen in April and May compared to the spike caused by early COVID panic-buying. This is likely due to COVID contraction as Amazon focused on essential verticals and consumers limited purchases of luxury items. However, June saw a rebound in CPCs as online shopping remained steady and competitiveness across most categories increased.
Despite budget uncertainties, average daily spending increased for both Sponsored Brand ads and Sponsored Product ads. Manufacturers in CPG categories are still playing catch-up with in-stocks, which means sporadic availability for some top items, yielding more noise than normal in daily pacing. Thanks to improved ROAS, this uncertainty did not see an overall decrease in ad budgets for most industries and instead saw advertisers getting more strategic with their ad spend. For categories which were dark due to lack of inventory, back half budgets are looking robust. This could lead to CPCs increasing in Q3 and Q4 as companies work with inflated budgets.
Despite Amazon’s push for advertisers to adopt new offerings such as Sponsored Display and enhanced Sponsored Brand, these changes haven’t had a significant impact on ad strategies. Advertisers with robust foundations continue to focus on the fundamentals of Sponsored Products and static Sponsored Brands and using these new offerings as enhancements. Products such as Sponsored Brand Video are showing good efficiencies and in general these new enhancements are welcome additions to a well-rounded strategy.
The figures and charts in this report are sourced from Pacvue’s proprietary Amazon keyword tracking database, which tracks ASINs from small, mid-sized, and large advertisers and aggregates data across every major product category. Our Q2 2020 CPC Report also includes month-to-month data to better display the effects of COVID-19 on Amazon advertising.
Click-through Rate For Sponsored Product Ads And Sponsored Brand Ads Converge In Q2 2020.
Q2 brings the big gap in CTR for Sponsored Product ads and Sponsored Brand ads to a bare minimum. CTR for Sponsored Brand ads fell from 0.58% in Q1 2020 to 0.44% in Q2 2020. For Sponsored Product ads the change was the opposite - CTR rose from 0.35% to 0.41%.
CTR for Sponsored Product ads are back at the same level they were a year ago in Q2 2019, and even higher than they were pre-COVID-19 in Q4 2019. Meanwhile, there is a downward trend for CTR for Sponsored Brand ads.
The average CTR for Sponsored Brand ads over the last five quarters is, however, still significantly higher than for Sponsored Products. The average CTR for Sponsored Brand ads was 0.53% compared to 0.38% for Sponsored Product ads.
ROAS On Sponsored Brand Ads Surpassed ROAS On Sponsored Product Ads.
With a decline in CPC for both Sponsored Product ads and Sponsored Brand ads, we saw an increase in ROAS. Sponsored Brand ads have the biggest quarter-overquarter growth of 22%, while Sponsored Product ads grew 8% in the same period.
However, Sponsored Brand ads are the only ones that have positive YoY growth in ROAS in both Q1 2020 (15%) and Q2 2020 (32%). This is also the first time in the last year that ROAS on Sponsored Brand ads surpassed ROAS on Sponsored Product ads.
Amazon Ad Growth: CPA For Sponsored Brands Decreased By Almost 25%.
Sponsored Product ads still have the most cost-efficient performance, but only marginally compared to other quarters. In Q2 2020, CPA for Sponsored Brand ads was $6.91 and $6.45 for Sponsored Product ads.
For Sponsored Brand ads this is a particularly big change in CPA. In Q1 we saw a CPA of $8.17, which means CPA decreased by almost 25%.
Conversion For Sponsored Brand Ads Is Still Better Than For Sponsored Product Ads.
The conversion rate for Sponsored Brand ads is higher than for Sponsored Product ads for the second consecutive quarter. The difference between the two increased this quarter despite the fact that both Sponsored Product ads and Sponsored Brand ads decreased QoQ by 11% and 2% respectively.
When it comes to yearly Amazon ad growth, the situation is quite different. Compared to the same time last year, conversion rates for Sponsored Brand ads grew 33%, while the conversion rate for Sponsored Product ads decreased by 7%.
See the full report here.
Created by industry experts, Pacvue combines AI algorithms and specialized eCommerce and advertising expertise to help their customers grow their share of voice, increase sales and improve profitability.
Headquartered in Seattle, the Pacvue team consists of Amazon veterans and eCommerce leaders united by a passion for technology, digital media strategy and data. For more information, visit www.Pacvue.com.