How Does Amazon Work? The Amazon Game Explained

​A lot of people want to know, “How does Amazon work?”. Warm up the Wayback Machine, we are going back to the early days of Amazon to trace the lineage of what I call ‘The Amazon Game’.
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What you need to know about Amazon Search
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• Amazon has evolved, but the origins of the platform are relevant today
• Advertising plays a different role on Amazon than it does on other search platforms
• Amazon PPC Advertising is not optional so plan for it in your financial models

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The Origins of Amazon Search
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The origins of Amazon Search began in the early 2000’s as Amazon expanded far beyond books and it became imperative to improve “how to serve customers with the most relevant products”. At first read you may think, “Just like Google, right?”, but not so fast. 

Google search was designed to facilitate customer research while Amazon was designed to drive a sale. This may seem like a distinction without a difference, and maybe in the early days it was, but as the platform has evolved it’s become very important indeed.

As Amazon ‘learns’ what products are purchased for specific customer queries, it increases the product’s organic search relevancy and ranking for that query.  And while the algorithm’s inputs and relative weighting are a well-kept secret, a Brand that focuses on the factors that support conversions will win in the end.
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The 4P’s of Marketing (Product, Price, Place, Promotion) are a good place to start, but they need to be translated to the idiosyncrasies of Amazon: 

• Product = Product Reviews, Seller Feedback, Images, Infographics, Titles, Bullets, Enhanced Brand Content
• Price = Buy Box, Off-Platform Price Competitiveness, Free Shipping
• Place = Search Ranking, Relevant Meta-Data and Proper Indexing, Prime Eligibility
• Promotion = Sample Packs, Bundles, Coupons, Deal Placements… and ADVERTISING?

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The Emergence of Amazon Pay-per-Click Advertising
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Fast forward to 2012 when Amazon enters the Pay-Per-Click Advertising game. 

The discussion for launching Amazon Advertising, specifically Pay-Per-Click (PPC) Advertising, provided a great philosophical discussion internally. 

On one hand, the ‘Sanctity of Search’ and ‘Preserving Customer Trust’ were foundational principles for Amazon.  But on the other, there were valid use-cases for which advertising would improve the customer experience.

One example arises with the question of what to do when a new model of a top-selling product launches for the upcoming season. Do you surface the old top-selling television, or its new and improved replacement model? It is in the ‘Customer’s best interest’ to be served the newest model efficiently and advertising placements were a valid means for doing so.
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And while it did lead to some bad behavior by Vendors, namely forgoing Co-op funding or cost reductions on unprofitable products to fund their advertising efforts, these were eventually addressed over time.  But regardless, Amazon had opened Pandora’s box, added a powerful new weapon to a Merchant’s arsenal in the process, and increased the complexity of how Amazon works.
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Changing the Amazon Game
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With the launch of Amazon PPC Advertising, Amazon changed the game and the distinction from Google Search becomes clear.

With Google there is a separation between Church and State; advertising conversions do not influence organic search results.  For Amazon, if your ads convert, not only will Amazon serve your ad more often for that targeted query, they will also boost the ranking of your organic placement for that same query. 
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This new reality fundamentally changed how the Amazon Game is played and made advertising a critical component of a brand’s success.  And not only did it add complexity to an already convoluted platform, but also ushered in the era of ‘Operational Marketing’… which we will get to in a separate post.

Why Should You Care about Amazon Advertising?
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If you are on Amazon, Advertising is not optional. Even if Amazon is not a priority for your business, a brand’s terms need to be defended to avoid losing customers to your competitors… fortunately, this can generally be done cost effectively.  And if you are looking to grow your Amazon business, a sophisticated (objective-based, operationally-minded) customer acquisition strategy is imperative for success; the marketplace is an arms race and you cannot leave your best weapon on the sidelines.  

todd vanderstelt | founder | dash/APPLICATIONS
as a former Amazonian, todd is an amazon expert who works with brands, agencies, and investment firms to demystify the platform while leading the development of our amazon focused solutions.

​https://www.dashapplications.com/about-us.html