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How Much Does Amazon Spend on Digital Marketing: 2018 SEM Edition

By Brandon Bever on October 17, 2018 in Digital Marketing

amazon

Have you ever noticed that every time you search for a product online you are pretty much guaranteed to see an ad from Amazon? It made us start to wonder about the retail giant’s marketing strategy and just how much Amazon spends on marketing on an annual basis. Being the digital geeks that we are, we also wondered what portion of that is spent on search engine marketing (SEM).

In 2017 Amazon wielded an annual marketing budget of $10.070 billion dollars (up 39% from $7.233 billion in 2016). So, how much of that is dedicated to showing up on seemingly every product search? According to estimates from Digital Commerce 360, nearly $451.2 million.

How does $451.2 million in SEM affect site traffic?

Looking at online retailer’s site traffic, we can quickly see the value in that $451.2 million dollars.

According to Similar Web, 31.72% of all desktop traffic comes via paid search. While we acknowledge that not all traffic is equal, and Amazon doesn’t release the CPA of each channel, 31.72% of their net sales revenue in 2017 was $56.42 billion dollars, making that $451.2 million seem like a bargain.

amazon spend

Amazon Can’t Rest at the Top

It’s easy to assume Amazon already has this online retail game won, so a YoY increase in spend would mean an increase in reach. While they do increase in sales volume YoY, a large share of budget increases simply maintain their market share. SEM cost per click is fluid and generated in live time creating a small competition between eligible advertisers every time a search is made. This means even billion dollar companies don’t have the luxury to “set and forget” campaigns.

Amazon points this out in their 2017 annual report saying, “Our marketing costs are largely variable, based on growth in sales and changes in rates. To the extent there is increased or decreased competition for these traffic sources…”

Takeaways:

  1. SEM creates the opportunity for smaller businesses to compete with giants, by allowing them to pick their battles with continually changing targeting tactics. Be accurate and efficient with SEM targeting instead of trying to go toe to toe with a 10.07 billion dollar marketing department.
  2. With opportunity comes competition. Your year over year increase in ad spend may not match your year over year reach/revenue increase.
  3. Understand your site traffic. Continue to develop and grow your strongest channels but be sure to search for opportunities in channels that may not appear obvious.

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