Last year, the the global digital advertising market swelled to $88 billion and 90% of that growth came from Google and Facebook. However, there’s a third tech giant poised to disrupt the duopoly: Amazon.
Connor Folley saw it coming early on, having spent two years as a marketing manager in Amazon’s consumer electronics department. He’s since left the company and started his own: Downstream, which is centered on using automation technology to help marketers maximize their Amazon ROI.
Amazon is a notorious walled garden, but Folley brings a certain insider’s perspective to his customers. We spoke with him about how Downstream’s origins, what many marketers tend to get wrong about the platform, and how its search differs from Google.
ClickZ: How did Downstream come to be?
Connor Folley: As Amazon’s advertising products took off, space around Amazon started to grow with agencies. Between price matching every retailer in the universe and competing against third-party sellers for your own buybacks, Amazon is a very dynamic advertising ecosystem. It’s so new and unique that it really demands a native solution. I know what it takes to move traffic inside the walls, so I bring a unique expertise.
Based on the strength of the opportunity, we were invited to join the Techstars accelerator program. With that, we got exposure to strong mentorship and a lot of venture capital. We closed out a large round of financing, which gave us the opportunity to scale our financing and development team. Now we’re working with over 200 brands, intending to be the dominant Amazon solution.
CZ: When did you see the writing on the wall, as far as Amazon becoming an advertising giant?
CF: I saw it pretty early on. During an earnings call, the CEO of the company said we report on sales, not clicks and impressions. Being able to report on attributed sales is like the Holy Grail of product advertising and brands quickly recorded tremendous ROI with Amazon Marketing Services.
In 2015, AMS was still a credit card-only platform. We had brands asking us every day when the invoice would be released. They wanted to spend more, but couldn’t keep burning up their credit cards. We started to see the big CPG companies move some of their Google and Facebook budgets to Amazon. Once Gartner and Forrester pointed how many product searches start on Amazon, a lot more product marketers started coming over.
CZ: Search is obviously huge for Amazon. What would you say is the biggest difference between Amazon and Google?
CF: People make the false assumption you can treat Amazon like any other search engine. Users don’t go that deep in Google searches, but you’ve generally got a longer tail than on Amazon, where search is incredibly concentrated in the head.
For example, the top three keywords for lightbulb drive more revenue than all the other keywords combined. I think of each search as an individual shelf. The first one is right in front of the shopper’s face, the second is 10 feet away, the third is 50 feet away, and on and on to infinity. There are endless aisles, but it’s damn near impossible to get a customer to notice most of them.
CZ: When we did the survey about Amazon strategies with Catalyst last year, one shocking takeaway was how many marketers don’t have one. Where do you think is a good place to start?
CF: There’s certainly strategy involved, but it’s mostly about investing in the appropriate resources, software and organizational structures because Amazon is fundamentally a really tactical platform. Every product has an Amazon Standard Identification Number, like a UPC code. We would joke that the business of optimizing your business on Amazon was shoveling the ASINs.
It’s not the sexiest work, but everything on Amazon is holistic. That means a lot of things on the backend need to be optimized in order to drive traffic. It’s very unlike traditional sales engagements because it’s a matter of algorithms making decisions. You and you can’t take the algorithm out to lunch so it’s impervious to traditional sales tactics.
CZ: Which categories do you think are the most and least vulnerable?
CF: I’d say business is vulnerable. In health care, distributors like Henry Schein or Cardinal Health make a killing selling latex gloves and that kind of stuff. It’s a very attractive, high-margin business with a lot of repeatable transactions. That’s a category growing incredibly fast on Amazon and if I were a company like that, I would be scared. Grocery is another monster category. As Alexa appears in more and more endpoints in your life—the car, the washing machine, the refrigerator—Amazon gets a much more comprehensive view of who you are as a consumer.
I’d say the most safe are the direct to consumer brands like Allbirds. Highly-curated selections and exciting retail experiences are the hardest to disrupt. Sweetwater Sound, which sells audio visual equipment and musical instruments, also comes to mind. They have a huge inside sales team and a very high-touch expert execution, which I think is difficult to disrupt.
The post An inside view on navigating Amazon: Q+A with Downstream CEO Connor Folley appeared first on ClickZ.