Advertisers grow spending in Amazon DSP as adoption increases

However, that could soon change.

Marketers are now pouring money into the ad tech (also known as the Amazon Demand-Side Platform) — why? Because Amazon has spent the last two years making it increasingly difficult for them not to.

For starters, it’s cheaper for marketers to use Amazon’s platform for programmatic advertising compared to its competitors. They typically pay only 10% of their intended advertising spend through the DSP, while with Google and The Trade Desk, they would need to shell out 15% and 20%, respectively.

And once they cough up that fee, the actual cost of ads through the DSP tends to be lower as well, especially for standard and remarketing audiences, which generally range from $2.50 to $4.

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When those financial incentives are combined with the rising costs of search and display advertising on Amazon — up 6% according to Tinuiti — and the fact that it’s DSP is the only way to advertising on the new Prime Video ad inventory, it’s easy to parse why marketers are lining up to spend more money on the ad tech — they’re getting more value for their money.

Tinuiti clients, which include Etsy and Gap, are a case in point. Their spending on the DSP has surged 27% this year compared to last, according to the agency. A major driver of this growth is advertising on Prime Video, with spending via the DSP soaring 255% during the same period. Overall, DSP spending is projected to constitute 30% of the agency’s total Amazon advertising in 2024, a notable increase from 22% last year.

Josh Glenn, vp of retail and commerce at performance marketing agency MindgruveMacarta, concurred. He said without naming names or providing exact figures, that his clients have upped their DSP investment by 42% this year compared to the entirety of last year. And it’s only going to accelerate, with those same advertisers poised to spend more than a third (37%) more in the final quarter of the year than they did for the same period a year ago.

The same story holds true for the advertisers that commerce ads business Pacvue supports, who are now spending an average of 6.85% more daily this quarter compared to the last, and nearly 18% more than this time last year. Sales have surged as a result, with nearly a 30% increase this quarter compared to the previous one, and a 13% rise compared to last year. However, returns on that spending are down 4.7% from the same quarter last year, though they’ve risen 21% from the previous quarter.

As promising as these figures are, it’s wise to take them with a grain of salt. 

They skew heavily toward larger advertisers, as smaller players typically don’t do much advertising from the Amazon DSP, if at all. 

And why would they? 

With a laser focus on profits, the returns from the DSP wouldn’t be worth the investment — especially when the managed service option demands a minimum ad spend of $50,000 while agencies suggest spending around $25,000 on the self-service option for optimal results. 

But that’s only part of the problem.

Even if these marketers had the budget to splurge, there’s little reason to believe they’d be able to do so wisely. Not when the platform’s complexity and steep learning curve can lead to mismanaged campaigns, especially for smaller marketers lacking the necessary bandwidth. Without it, they risk squandering their budgets on ineffective strategies, making the investment feel like tossing money into a black hole.

In short, the DSP starts to look less like a smart advertising solution and more like a costly gamble.

“It’s early days for the Amazon DSP and it has a lot of room to grow but a lot of that will be dependent on those long tail sellers who aren’t currently using it,”  said Melissa Burdick, president of Pacvue. “The DSP has no real traction there.”

Yet, it’s hard to believe this status quo will hold out for much longer. Recent updates to the DSP, such as the new interface and AI-driven features, have been designed specifically to cater to the needs of smaller advertisers, making the platform more accessible and effective (at least in theory) for them.

Arin Schultx, vp of sales and marketing at organic mattress company, concurred. While he didn’t dive into specific numbers like Tinuiti, he emphasized that his team is investing significantly more in advertising via the Amazon DSP than they were a year ago. He added, “Once we committed to the DSP, we saw a spike in our overall sales.”

The more advertisers can get marketers like Schultx doing this the more it stands a chance of becoming a real influence over the ebb and flow of ad dollars. It’s their ad dollars, much more than those from larger counterparts, that will truly drive growth.

That said, Amazon hasn’t forgotten about its larger advertisers. On the contrary, one of its biggest financial incentives this year has been aimed squarely at them.

Let’s say for instance, a larger advertiser spends one million dollars in Amazon DSP. For just one per cent of that cost ($10,000), they could secure run-of-network ad inventory — think broad reach and frequency across a network of sites without the ability to specify. That’s bound to catch the attention of larger, non-endemic advertisers eager to reach as many people as possible. The same apologies to those new to the Amazon DSP: aggressive pricing effectively lowers the barrier to entry.

“Amazon is certainly building strong incentives for brands to bring their marketplace negotiated deals into the Amazon DSP,” said Joe O’ConnorSr. director of innovation and growth at Tinuiti. “The announcement of the 1% fee at unBoxed [last year] is reflective of that strategy, and a substantial value offer to port deals into ADSP.  At Tinuiti, we have seen more clients bringing their deals into ADSP — particularly among streaming TV publishers. With this offer, I anticipate that we’ll see the pace at which deals are launched in ADSP accelerate further.”