Amazon Advertising strategy: Sales impact of combining display and sponsored ads

15 February 2021

By: Daniela Yu, Sr Analytics and Media Manager
and Koen Pauwels, Principal research scientist

Advertisers want to understand the impact of their ad campaigns, but it can be hard to compare the effects of different types of ad products, such as sponsored ads (Sponsored Products and Sponsored Brands) and display advertising. While both types of products can help you drive sales, they reach customers at different touchpoints and in different ways.

Plus, to truly understand the effects of your advertising, you want to look at overall performance across ad products over time.

To help our customers better understand how much advertising affects sales, and for how long, we analysed the impact of display ads and sponsored ads for CPG advertisers. Our results provided insights that can help improve your Amazon Advertising strategy.

Key facts about the study

  • Who: We focused on 14 brands, spanning 6 large categories (e.g. “Coffee and cold drinks”) from 3 verticals (e.g. “Food”).
  • When: We gathered data through 77 weekly observations (a total of 1078 observations) from January 2018 to July 2019.
  • What: We analysed sales as a function of advertising impressions. For the purpose of this study, we are using the term sponsored ads to refer to Sponsored Products, Sponsored Brands or both. We are using the term display ads to refer to cross-screen packages on Amazon, Amazon DSP display ads packages or both. Our analysis also included retail impressions, which are impressions that are neither display nor sponsored ads, such as placements on category pages on Amazon or recommendations on product detail pages.

Key insight no. 1: Amazon Advertising has a carryover effect on sales

The benefit of display ads and sponsored ads goes beyond just the immediate increase in sales. Advertising can help shoppers remember your brand or products, and may result in shoppers thinking of you when they are researching and purchasing.

Visual 1. Sales elasticity over time for two brands when display (solid line) and sponsored ads (dotted line) impressions increase

Take a look at two of the brands that we studied. These charts show what happened when these brands doubled ad impressions. The percentage increase in sales for a 100% increase in ad impressions is known as sales elasticity.

On the Y-axis is the sales elasticity of display (solid line) and sponsored ads (dotted line). On the X-axis is the number of weeks. Ad spending increased in week one.

As we can see, doubling display impressions increases sales by less than 1% in the first week for both brands. But in later weeks, the sales impact is higher, demonstrating the sales benefits of display ads beyond the immediate effect – also known as a carryover effect.

For brand no. 1, sales elasticity of display peaks in the second week and slowly reduces after that, reaching a non-statistically significant level after five weeks. In contrast, doubling sponsored ads impressions immediately increases sales by more than 1% in the first week, but elasticity declines over the following weeks. For this brand, the total sales elasticity of display (the area under the curve) is larger than that for sponsored ads.

For brand no. 2, the sales elasticity for sponsored ads (dotted line) is actually greater than the elasticity for display ads (solid line).

In both cases, the total sales effect of ad spending is higher than its immediate impact.

Key insight no. 2: Total sales effects can be higher for display than for sponsored ads

For some of the brands that we studied, sponsored ads had more of an effect on sales in week one, but the total sales effect was higher for display ads.

We looked at both the immediate (week one) and carryover (week two and later) impacts of display ads and sponsored ads for all brands in the study. We then added the immediate and carryover effects together to find the total sales elasticity of advertising.

Overall, sponsored ads showed higher sales elasticity. This might not be surprising, because sponsored ads can definitely help increase sales. But we also want to recognise that display ads showed higher elasticity for 5 out of the 14 brands that we studied. Only looking at week one results would actually lead these brands to the wrong conclusion about their advertising performance.

In other words, display advertising can also be an important way to help you grow sales, particularly for your long-term Amazon Advertising strategy.

Key insight no. 3: Display ads and sponsored ads can work better together

Half of the brands that we studied showed that different ad products worked significantly better in combination – also known as synergy. Different types of advertising can help drive awareness and consideration before the sale. The synergy between these touchpoints can result in shoppers being more likely to buy your product at the end of the purchase journey.

All 14 brands used sponsored ads, display ads and retail impressions for at least some of the weeks of our study. We observed synergy among advertising impressions for half of the brands. Three brands showed synergy between display and sponsored ads, another three between display and retail, and the last one between sponsored ads and retail.

Let’s look at one brand as an example:

Visual 3. Synergy effect of sponsored ads and display

We ranked weekly observations by the number of impressions, creating “top half” and “bottom half” groups for sponsored ads and display respectively. When both types of advertising were in the bottom half, we used those weeks as a baseline.

  • Bar 1: Baseline (bottom half sponsored ads, bottom half display ads)
  • Bar 2: Top half sponsored ads, bottom half display ads
  • Bar 3: Bottom half sponsored ads, top half display ads
  • Bar 4: Both sponsored ads and display ads in top half

Increase in sales compared to baseline:

  • Top half sponsored ads, bottom half display ads: 34% higher
  • Bottom half sponsored ads, top half display ads: 12% higher
  • Both sponsored ads and display ads in top half: 78% higher

Using sponsored ads in some weeks and display ads in other weeks resulted in a combined total of 46% (34% + 12%) sales increase, which is less than the 78% increase from using both sponsored ads and display at the same time.

In other words, the synergy of display ads and sponsored ads was more than the sum of using sponsored ads or display ads alone. This means that brands can see better results by using display ads and sponsored ads together, even if they don’t increase their advertising spend.

To learn more about using sponsored ads and display ads to achieve your business goals, please contact your Amazon Advertising account executive. If you’re new to Amazon Advertising, contact us to get started.