Amazon DSP: Weighing Up the Cost and Potential Revenue

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Amazon DSP is a demand-side platform that offers programmatic advertising, a form of digital marketing that automatically purchases ad space on behalf of the business across multiple channels from a single, centralised location to maximise online visibility. 

Businesses that sell through Amazon – and even those that don’t – are using the Amazon DSP to purchase display, video, and audio product ads. This covers not only the Amazon Marketplace itself but almost the entire Amazon ecosystem, from subsidiaries like IMDb and Amazon’s shopping apps to Kindle and Fire devices and third party sites. 

The benefits of Amazon DSP are obvious. The ability for businesses to build, optimise, and automatically deliver the right ad content, to the right channel, the right device, and the right audiences at the right time is, after all, the advertising dream. 

But there’s a burning question at the back of every advertiser’s mind:

How much does Amazon DSP cost?

In this article, we will take a closer look at the budget requirements for using Amazon DSP and explore whether these costs can be offset through the potential revenue and return on investment that comes with programmatic advertising. 

How Much Does Amazon DSP Cost?

There’s no single, fixed price for using Amazon DSP, especially as two different Amazon DSP options are available: self-serve or fully managed. 

●       Self-Serve

The Amazon DSP self-serve option gives users complete control over all aspects of their advertising campaigns. The business or an appointed agency manages keywords, ads, auction types, budgets and strategies. 

Self-serve is often the most cost-effective method of using the Amazon DSP as there are no management fees, and businesses can pick a budget that works for them. However, like most DSPs, Amazon charges a percentage of the clearing price, which varies considerably. 

There are ad costs for self-service customers, too, which will vary. For example, businesses will pay more for placements on more premium channels and on higher usage devices, which can quickly deplete smaller advertising budgets. 

Ad costs will also vary depending on how space is purchased. There are three purchasing options with Amazon DSP: fixed price, open auctions, and private auctions. 

With open auctions, businesses will pay the amount they bid should they be the highest net bidder to go above the publisher’s minimum set price. With private auctions – often by invitation only – businesses will simply pay $0.1 more than the second-highest bid. 

And, as of November 2020, ad costs also vary by advertising goal. The new Bid Strategies feature allows businesses to instruct the algorithm to prioritise budget delivery over campaign performance, or vice versa, depending on their individual needs. 

One aspect to keep in mind is that while Amazon requires no minimum spend for the self-service option, there’s an unspoken rule that businesses should be prepared to spend between $3,000 and $5,000. They should also be generating upwards of $100,000 per month in sales on the Amazon Marketplace to make Amazon DSP genuinely worth it. 

●       Fully Managed

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The Amazon DSP fully managed option sees Amazon experts take over all aspects of campaign planning, management, and execution. Everything happens behind the scenes, with businesses typically not involved in any element of the programmatic ads. 

All costs are bundled into the fee, so it’s incredibly challenging to provide even a rough figure of how much the service costs. Instead, Amazon generates custom pricing for its managed service clients. You can request custom pricing by clicking here

Amazon recommends this service for ‘companies that want access to Amazon DSP inventory with consultative service, or for those with limited programmatic advertising experience’. It can be an excellent way to squeeze more value from the DSP for newbies. 

The benefits of a fully managed service are clear to see. It leaves businesses with more time to spend on what they do best, safe in the knowledge that Amazon experts are designing campaigns that deliver. However, there’s a downside, too. The mandated $35,000 or £10,000 minimum spend over six months can be a barrier to entry for some. 

Potential Revenue from Amazon DSP

Amazon has long held a solid reputation for delivering impressive returns on investment for marketers. In fact, last year, a report confirmed that 59% of advertisers received their biggest return on media spend from Amazon. In comparison, only 22% said the same about Google. And it’s a similar story when it comes to the Amazon DSP. 

While the impact of the DSP has been slower to see, it’s now clearly coming to light. In Q4 2020, half of all businesses using the Amazon DSP said that it delivered a ‘high’ return on advertising spend; that’s up by 14% from the previous year. These figures show that the Amazon DSP is really starting to come into its own and deliver on its early promises. 

While there’s no definitive answer to Amazon DSP’s potential revenue, the platform has created some case studies that show impressive results for major firms. For example:

Samsung used Amazon DSP to boost video completion rate to 77%, helping to improve product awareness amongst customers and generate more interest in the brand. 

Casio used Amazon DSP to deliver a 400% increase in unique visitors, and a 330% increase in page listing views, bringing more visitors into the ‘consideration’ stage.

Govee used Amazon DSP to increase traffic by 350%, sales by 340%, and orders by 310% over 12 months, directly boosting profits and revenue. 

The big question now is ‘why does the Amazon DSP hold the secret to maximising revenue’?

●       First-Party Data

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The first – and perhaps the most obvious – way that the Amazon DSP is a treasure trove of potential revenue is due to its extensive pool of first-party data. Amazon is by far the largest online marketplace. It serves shoppers all over the world. And not only shoppers but TV viewers, gamers, film buffs, and more through its devices and subsidiaries. 

While companies like Google could say the same, there’s a big difference. Google understands the customer from a purely interest-based perspective. Google knows what people search for. Amazon, on the other hand, knows what people buy. It’s a pool of accurate purchasing data and history that the DSP leverages for improved results. 

Amazon is the only DSP to enjoy access to such extensive and authentic buyer data, making it the most effective and intelligent platform for automatic bidding. Moreover, it gets the right ads in front of the right eyes, truly maximising return on investment. 

●       DSP features

The second way that Amazon can maximise revenue is through its unique features. There are far too many to explore all of them, but we do want to highlight one exciting new feature that was rolled out in January 2021. It’s called Responsive eCommerce Creative, and it’s available to all DSP users on both self-service and managed plans. 

The Responsive eCommerce Creative feature does exactly what it says. It responds to various factors automatically to ensure every ad purchased through the Amazon DSP is relevant and brings value to the business. For example, the feature can prevent rendering items listed as being out of stock, reducing the risk of wasted ad spend.  

Tracking Performance

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A further question that advertisers may be asking is how they can be sure Amazon DSP is driving their revenue in the right direction. The answer? Amazon DSP reporting. 

The built-in reporting in Amazon DSP is excellent, combining retail insights with on-Amazon activity to show how DSP efforts are impacting product discovery, product research, and of course, sales. In addition, there’s a wide range of reporting features that come as standard, from industry metrics to more niche Amazon metrics like detail page view rate (DPVR), add to list (ATL), new to brand (NTB), reach, frequency, and viewability. 

And if that’s not enough, several third-party reporting solutions can be integrated to take your analysis deeper and allow for more effective monitoring of your DSP-related revenue growth.

Do The Benefits Outweigh the Costs?

That’s an almost impossible question to answer, as every business will have different needs and expectations. What we are confident in saying, however, is that due to the high costs of programmatic advertising, Amazon DSP isn’t for everyone. 

Suppose you’re a large business generating consistent revenue, and you’re firmly established either on Amazon itself or within the broader eCommerce landscape. In that case, Amazon DSP can be the natural next step to take your advertising efforts beyond the standard Sponsored Ads campaigns. Contact ClearAds for more information on getting started with a self-service package hosted by Amazon, controlled by you, and operated by us. 

If you’re a small business, a new business or you simply don’t have the budget to use Amazon DSP just yet, don’t panic. There are many more ways to maximise visibility, boost sales, and generate revenue without programmatic advertising. Contact ClearAds to find out more about optimising your Amazon ads and do more with less. 

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