Maximizing Amazon’s Ads: From PPC to DSP with Max Hofmann of BidX

Oleg:
Hello everyone, welcome to another episode of a Navigators podcast, and today we have a special guest, Max from BidX, that will talk about the future of Amazon advertisement platforms. I really love it, it's marketing cloud, thep and all the stuff, and, yeah, welcome Max, good to see you, welcome.

Max:
Thank you for the invitation.

Oleg:
To start in, I would like you to tell us a little bit about your story, how you end up being a co-founder of BidX, and in Amazon space, and like, yeah.

Max:
Yeah, so it all started almost a decade ago, it was like in 2015 when I started to sell baby safety equipment on Amazon, and at that time it was pretty easy to launch new products. It was much less competition, it was much, much less crowded, and so it was really easy to scale and to get the business to a certain threshold where it was really making money. And one key part of the success with the business was advertising, but it was done all manually.

So we were increasing bits, decreasing bits, shifting keywords, it was done all manually, and it was like a really tough task, but it needed to be done because it was like a lot of budget involved into it, and if you would neglect it, then you would just waste a lot of budget or you would miss out on potential sales. So we thought there must be an easier way, there must be like a way as for Google, as for Facebook, where there were like software platforms that would automate that, but Amazon was only about to release in 2017 API capabilities, so that software companies would be able to also write programmatically these changes.

My girlfriend at that time, Nadine, and my wife today, she studied computer science, and she said, "Well, if there is not a software out there yet, then maybe it might make sense to build one." And so we developed like a first MVP, which was a really, really simple version, but in essence, it did the job. And we posted it on Facebook, and like within 24 hours received 200 requests of joining that Alpha version, and we realized that we were not alone with our problem in scaling ads, and there really was a need that a software should automate all the recurring tasks to increase the performance of the ads, but also to save time.

So in 2018, then we officially launched BidX, and now we grew the company to 50 team members, we opened up an office in the States, and we have our headquarter over here in Europe, in Germany. And we are supporting brands with PPC ads, with DSP ads, and with a whole analytics with the AMC, Amazon marketing Cloud.

Oleg:
Nice journey, actually. I started my Amazon journey also in 2015, it was a good time to SC.

Max:
Yeah, it was so easy.

Oleg:
Yeah, when you saw that it was easy, yes, you had the time to do mistakes, to learn from them, and then to iterate and grow, so much easier than it is nowadays.

Max:
Yeah, absolutely.

Oleg:
Yeah, so the "wild west" times are over, and now it's a serious time. So, and getting to the topic of our discussion, I know you guys are very focused on going like further from the PPC of Amazon, and, uh, I am also a big fan of the Amazon marketing Cloud. I think this is a very under-evaluated tool, probably because it's very complicated, right? And, uh, the Amazon DSP, so can you give like a little bit overview of what are the biggest challenges of the Amazon sellers or brands that can be solved by this type of technology?

Max:
To start with Amazon DSP, I would say the most challenging part in the beginning is to educate brands about the capabilities that do exist. So most of the brands are nowadays very familiar with all the different sponsored ad types, and they are making use of that, but beyond that, oftentimes it's very limited in terms of knowledge but also in terms of access.

So if you want to access Amazon DSP campaigns, you either need to go to Amazon to ask for a managed service, they have like really high budget requirements for you to hit, or you go to a third-party agency that is enabling you access or a sub-seed to access Amazon DSP advertising. And the third one is, if you are big enough, if you have enough budget, then you can also request your own seat. However, it is quite a complex system, I would say, but the opportunity to use it is endless.

Amazon DSP allows you to run display as well as video ads, not only on Amazon but also off Amazon across the whole internet, and you get very precise targeting of audiences as you would get on Facebook, for instance, but not from people who like certain things but like from people who actually purchase certain things. So Amazon does have such a rich data set about the buying power, about the purchasing behavior of its core customers, that it is, in our opinion, the strongest DSP, the strongest demand-side platform that is out there, which provides you the highest amount of return on every advertising dollar that you spend.

Oleg:
Yeah, we have, uh, the conversation with most of our clients or other, like, peers in Amazon, saying, "Yeah, yeah, try this DSP," like, uh, "It doesn't work, it's, uh, you know, like ROAS is not the same," and, uh, how do you approach this? Because especially Amazon sellers that are coming from the Amazon PPC, they are very connected to the performance-based advertisement, but with DSP, you can still use performance-based, like remarketing, I believe, but there is much, much more, and, uh, it's different metrics. It's sometimes detailed page views, right, or it's not all about, uh, ROAS.

It makes, uh, Amazon community a little bit, yeah, it's, it's challenging, that's true. So it's like not the easiest ad type, and so you really need to invest time to learn the ins and outs, or work, like, with a strong partner. So first, to start with it, is to make use of it, you need a certain amount of data and you need to have a certain amount of ad spend.

What we recommend is to only start with Amazon DSP if you spend at least $115,000 per month on Amazon for PPC ads. If you hit that, then also expand to DSP. If you are below that, still double down on PPC; it will provide you a higher return, probably. However, if you realize that you hit a certain limit with your ads, and you realize that you have maxed out your sponsored products, you have maxed out sponsored display and sponsor brands, and you still want to grow your top-line sales, you want to expand, you want to reach new brand customers, then you need to have more placements, and placements in different areas, like not only on Amazon but also off Amazon.

And as you mentioned, the easiest way to start with is to start with a remarketing campaign, to start with customers who abandoned the cart. But then you can also much more detailed cross-market products to each other, you can remarket not only your own products but also your competitive products. And then you go step by step, you go a little bit outwards, and in most cases, this is going to increase your audience size that you are able and capable to reach. But it will also sometimes decrease the return of ad spend that you receive, so it is the balance to scale up step by step and to find the most efficient ways for you to gain new-to-brand customers and to gain top-line sales, but with a similar ROAS that you also have with the sponsored product ads.

And in terms of measuring, it is clear: we have, like, a PPC model where it is, like, pay-per-click, and we have, like, a last-click attribution for the sponsored ads. And for DSP, we have a so-called CPM model, which is cost-per-mille, so you pay for 1,000 impressions, and Amazon DSP is also attributing, like, if somebody viewed the product and purchases afterwards, then this sale is attributed to that view, which might get a little bit confusing.

And that is where the Amazon marketing Cloud comes into the game, where you can really deep dive into the customer path to conversion, and where you realize, "Okay, how many touchpoints did a customer have with the DSP, for instance, until they purchased, and what impact did the DSP ads have, and is it actually valuable for me?"

Oleg:
Yeah, this is a different way of thinking because AMC can give you the customer journey, and in the Amazon space, it's strange. If you do any other digital marketing, it's normal, right? You have the lead, you have the put your Facebook ad and landing page, and so on, so it's, like, normal.

And now we have the AMC, and what are the, like, best practices you use AMC for, like, this journey as you mentioned, or something else?

Max:
So it is to provide brands a better understanding of how their customers and potential customers are engaging with their products and with their ads. So Amazon marketing cloud makes sense if you run PPC and DSP ads, but it also can be used just for PPC.

And in addition to that, Amazon built this Amazon marketing Cloud as a generic platform where you can also put in information from outside of Amazon, so if you have your own CRM or if you have website data, if you have retail presence, you are able to funnel back this information to the Amazon marketing cloud and get, like, a full picture of your advertising activities.

And when talking about attribution and the value of DSP, for instance, it is oftentimes that new-to-brand customers do have the first touchpoint with the DSP ad, so they see, like, a display banner or like a video, and nowadays you can also run the video ads on streaming TV devices, on Prime video, and on Twitch.

And you see that oftentimes you have, for new-to-brand customers, the first touchpoint with the DSP ad, and now it does not really make sense to then completely ignore that. It was only the first touchpoint, and the last touchpoint was, like, with the sponsored product ad, and so allocate the whole sales part to the sponsored product ad.

But to think about the attribution and Amazon marketing cloud allows you to develop your own multi-touch attribution model, or to develop, like, a model where the attribution is a little bit U-shaped. So you assign a certain part of the sales to the first touchpoint, a little bit to the middle, and a certain part to the last touchpoint. So it's not so much weighted to the very last touchpoint, and that is where Amazon marketing Cloud helps you.

It also enables you then to, for instance, remarket an audience which already purchased after the second touchpoint, so you see how many touchpoints were needed so that this kind of audience purchases, and you can build audiences based on that, and then remarket similar audiences where you know these will convert very well in the future.

Oleg:
So, you're using, uh, a lot of the AMC to build custom audiences, right, if I understand correctly?

Max:
Yeah, because at least we use it mostly for, like, data analysis part, and, uh, a little bit for audience creation. And what you're saying is, like, audience creation is a big part of it, nice.

Yeah, and also with Amazon DSP, you do have much more precise control on which devices and in which areas your ads should be displayed. So if you have products that are much rather bought in a warmer region, you on the one side see, like, based on zip codes where your ad is actually displayed, which you normally don't do.

And with the DSP, you are also able to only run ads regionally based, so for instance, if you sell some sunblock or whatsoever, you could limit that in the US just to Florida and California, for instance, because you get, like, the most sun over there.

And these again are, like, small steps of how you are able to leverage the capabilities of the Amazon DSP, and how you also get similar or even better returns of your ad spend compared with the sponsored ad part.

Oleg:
Nice, and, um, talking about DSP, uh, what we found out is that, uh, it's also not easy for brands to understand that, uh, in sponsored products, you basically use your product as a creative, and sometimes you do some, uh, for sponsored display, a little bit. But when you get to DSP, if you have your creative capabilities and you create a lot of different banners, different videos, you can really increase the conversion and everything, right?

Max:
Yeah, so what we found is true. If you have a brand that is known, if a customer sees a banner from a brand where they are already familiar with the corporate identity of that brand, that of course then increases the conversion rate.

For much rather smaller brands or private label brands, where the brand does not play a significant factor, we do receive very good performance with the default responsive e-commerce ads, where Amazon automatically creates a banner and also adjusts the size of the banner to the different formats based on image, Prime availability, price, rating, and so on.

So it pretty much looks like an ad from Amazon itself, and it's also very easy to set up in the beginning because you don't need any assets from the brand owner. And so in the beginning, we start with that, and once we see traction, once we see that higher budgets are able to be allocated to the Amazon DSP, then we also start with custom banners and with video ads, so that you can tell your story and you can have your ads in your corporate identity.

Oleg:
Yes, yeah, yeah, it's like you repeated it already a few times, it's a gradual process, right? You can build up slowly, and, uh, yeah, in our opinion, it much rather makes sense to take the time in the beginning to, um, really get the basics right, um, to get all the measurements right, to set up the AMC for the brand.

And then, once all the measurements are in place, and once you are able to have a setup that scales, then invest more because, like, if you invest too much at the beginning, you'll probably also waste a lot.

And if you have a little bit of time, we recommend at least three months for that, um, and then we can gradually build on that. And most of the brands that start with Amazon DSP switch to an always-on approach. In the beginning, you try a little bit, trial and error, with a smaller budget to see what works and what does not, until you have sufficient data to make decisions.

And then you keep an always-on approach with the most profitable ones, and you turn on new-to-brand campaigns if you see that top-line is a little bit going down, or if you want to expand, if you raised additional money, or whatsoever, if you need to get rid of some overstock, whatsoever, then you increase the budget during certain times, and then you also know which campaigns to turn on and which campaigns to boost to receive these results.

Oleg:
Okay, and, uh, I believe you're very connected to the development of the platform. You probably have the partnership with Amazon, and you know more or less where things are going, especially taking into consideration that we have all this generative AI.

If you follow the news, like Google and Facebook, they add a lot of AI in the ad management platforms, and we still don't see much on Amazon. We can create some, um, images, but it sucks, in my opinion, yet. But where do you think the platform is evolving, like Amazon advertisement? Like, for me, for example, as a brand, what should I be thinking in the future?

Max:
Amazon has realized that advertising is tremendously profitable for the company, and when you look back at the last results that the company presented, as the profit grew, so did Amazon advertising revenues.

So it's a real profit center for Amazon because it is able to monetize real estate on their own website, that is kind of already up and running, which now is, like, margin-wise, very, very valuable for Amazon. But they also realized that, to continue that growth that they have seen in the past, they need to expand beyond amazon.com, beyond its owned and operated platforms, because the space that it does have is just limited.

And when we go to Amazon today, we already realize how many ads there are on it, and to not interfere with the customer experience, they need to limit the amount of ads on Amazon, and if they want to further grow, they need to go off Amazon.

And they did so with sponsored products off Amazon placements, with sponsored display ads off Amazon, but these were always kind of limited, and only a fraction of the budget was allocated to off-Amazon placements. With the Amazon DSP, a much larger amount of budget is allocated to off-Amazon placement, and it's kind of opening up Amazon advertising to the whole internet, and it's also opening up Amazon audiences and its data to brands that are not selling on Amazon, like an automobile company or like a credit card company.

These companies don't sell their products yet, even though Hyundai, for instance, just announced a partnership with Amazon where they might sell cars on Amazon in the near future, and maybe you can then also directly get your new car delivered with a Prime truck, so we'll see how that goes.

But for many brands who are not capable of selling at the moment, they can also use the Amazon DSP, and last year we've seen many announcements where Amazon announced partnerships with Pinterest, where we've seen announcements for a partnership with Facebook. So Amazon is becoming the global, in the Western world, the global place to check out physical products and to have that fulfillment, and Pinterest's target, for instance, is to make every single pin that exists shoppable, kind of, and Amazon is going to help with that.

And also AI is going to help with that, because it is not an AI-generated image or what we see now with the early days, but it is an AI that is recognizing what products are actually on the pin that is shown, and can we find these pins also on Amazon, and then if we do, with a certain amount of certainty, then we can directly link them, and we see the picture, we see the elements on it, and we can directly purchase them on Amazon.

And also Facebook tried to have, like, its own Marketplace, but kind of failed, so you realize that even if you are like a multi-billion-dollar company, you can't just get rid of your roots. So if you started as a social network, it is very challenging for you to become a marketplace the next day, but like operation of, and it's the other way around for Amazon.

Amazon tried social a couple of times, kind of, and also the efforts that it does have nowadays are, I don't know how they judge it internally, but in terms of engagement, probably they would expect much more, so it kind of makes sense for these big corporates to find ways to integrate their services into one another's, and everyone is doing what it's doing best.

And, um, we think that off-Amazon placements, the partnerships with other large companies, and also now where Amazon is expanding to, um, OTT (over-the-top) streaming devices as Fire TV, as other platforms, and is providing advertisements on big screens, they are now tapping into competition with generic cable TV ad providers, and it's like a huge amount of budget that is in TV, for instance, where Amazon might get step by step into. So we think it's a very exciting future coming up, and it will take a couple of years until it's going to slow down.

Oleg:
Yeah, this streaming TV, they push it very hard, and we get, like, some free credits for most of our clients on this last Q4 season, but we're still analyzing the results. I'm still trying to learn how it works.

Max:
Okay, interesting.

Oleg:
And I didn't know about the Pinterest-Amazon integration. I will Google it and learn about it; it's interesting, it sounds like the next step, because many people try to promote on Pinterest, and it's going to be, wow, awesome.

Oleg:
Okay, thank you, Max, it was very insightful for me, I hope very insightful for our audience as well. What is the best way to find you if someone wants to talk to you?

Max:
Reach out to me on LinkedIn personally, and if you are interested to learn more about BidX, go to our website, bidX.io. We offer a 14-day free trial; you can sign up for free at any time.

Oleg:
Okay, so thank you everyone for listening, and, uh, put a like and subscribe if you're not yet, and, uh, thank you, Max, really.

Max:
Thank you for having me, have a good day.

Oleg:
Bye-bye!

Max:
Bye-bye!