Amazon Quietly Retreats from Google Shopping

Note: Since this article was written, Amazon has decided to reinvest in Google Shopping. An update regarding this move will be published in the September edition of the Media Impact Report. 

In late July, Amazon suddenly pulled all investment from Google Shopping Ads both in the U.S. and internationally, catching both Google and other advertisers by surprise. The e-commerce giant previously held a near 60% impression share in the U.S. market in Google shopping results. In 2018, Bloomberg reported that Amazon was spending over $50 million on Google Shopping ads alone. This move came just days after a record-breaking Prime Day; the company’s 10th anniversary of the iconic annual sales event.

What is Driving the Exit?

Amazon has not shared any information as to why they have pulled all funds from Google Shopping. However, there are many reasons why Amazon would make such a drastic change. Some range from simple testing to a more extreme shift in the digital marketing landscape:

• Incrementality Testing – Amazon has a history of increasing and reducing spend across marketing channels, most notably during the early days of the pandemic. This could be the company testing whether Google Shopping brings incremental conversions or if users will land on Amazon organically in a show of brand recognition and loyalty.
• Reducing Dependency On Google – Amazon may be testing its relationship with the search engine giant. Spending the money to advertise on Google ads will reduce the margins for sales on the platform. Ultimately, a move like this could push brand loyal consumers to go directly to Amazon instead of clicking through an ad on the search engine results page (SERP) at a cost-per-click (CPC) premium. However, this could also be a way for Amazon to gain leverage against Google for better pricing on advertising.
• Development of AI – Amazon has been developing its own AI-assisted search function on its platform that would allow users to shop brand sites directly, even if the brand does not sell directly through the giant. Amazon uses AI to expand a user’s search across the internet and allows them to stay on Amazon or purchase from the retailer site. This feature is currently in beta but signals a move to topple Google from its position as the top one-stop-shop in e-commerce search.

Impact to Advertisers

The disappearance of such a large and typically ever-present advertiser in the Google shopping ecosystem has created a vacuum. Amazon’s combination of large budgets and reach across many product types have put competitive pressure on advertisers driving up CPCs, especially during Amazon’s promotional events like Prime Day. It’s expected that without that competitive pressure, advertisers will see a dramatic decrease in CPCs. Early reports state that there has been a 1-4% decrease in CPCs. The change will become most apparent should Amazon choose to not participate in Google Shopping during the highly competitive Black Friday/Cyber Monday holiday shopping season.

While unclear what reasons Amazon has for exiting the Google Shopping auction, this presents opportunity for advertisers:

• Fill the space fast. With Amazon gone, now is the time to fill the void left by the e-commerce giant while it still exists. Capitalize on the opportunity for lower CPCs and higher impression share especially heading into an economically uncertain Q4.
• Monitor, adapt and prepare. With the uncertainty surrounding this sudden move, it is unclear how the landscape will shift. Audit your campaigns for performance shifts and adjust strategies accordingly. Regularly monitor your auction insights reports for a potential Amazon return or for new players entering your auction space. Prepare to pivot strategies or move spend to other channels or tactics based on sharp changes in performance. This includes performance on Amazon storefronts in addition to Google shopping.

Amazon’s exit from Google Shopping isn’t just news, it’s a strategic and seismic change to the e-commerce and digital marketing landscape. Agile brands who pivot quickly to capitalize on the shift will benefit while others who stand back may be missing an opportunity in an uncertain economy.

This article is featured in Media Impact Report No. 68. View the full report here.