Amazon DSP represents a significant shift in thinking about the Amazon Advertising ecosystem. Unlike PPC advertising methods you might be used to on Amazon, DSP operates through programmatic display advertising, which automates the buying and selling of digital display ads at great scale. This automation is the modern version of buying a billboard along a busy road, and DSP streamlines the process for both publishers and advertisers.
The platform has undergone several transformations to become more user-friendly and integrated. Previously, Amazon offered three separate advertising services: AMG (Amazon Media Group), AAP (Amazon Advertising Platform), and AMS (Amazon Marketing Services). Now, everything is consolidated under the Amazon Advertising umbrella, with the Amazon Advertising Platform rebranded as Amazon DSP.
With over 2 billion monthly worldwide visitors to amazon.com from October 2023 to March 2024 and a remarkable 50% increase in brand adoption this year, Amazon DSP presents a powerful opportunity for businesses looking to expand their reach. However, the decision to implement DSP requires careful consideration of various factors to ensure it aligns with your business objectives.
Understanding the Basics of Amazon DSP
Programmatic Advertising Framework
Amazon DSP operates on a dynamic Cost per thousand (CPM) model, which automatically adjusts campaign pricing based on ad spot availability and competition. This differs from standard CPM models where advertisers pay a fixed rate per thousand impressions regardless of demand. The dynamic nature ensures advertisers can bid optimally without exceeding their predetermined limits, as they can set base and max CPM guides to help control cost.
The programmatic advertising framework fundamentally changes how digital advertising is bought and sold. Through automated processes, businesses can purchase ad space more efficiently and effectively than traditional direct-buying methods. The system operates on impression-based bidding rather than click-based metrics, allowing for more nuanced targeting and optimization. Market conditions and competition directly influence supply availability and pricing. For example, in the days surrounding an event like Black Friday, ad inventory is in high demand and will cost more per CPM or be constrained.
Advanced Targeting Capabilities
DSP’s targeting capabilities far exceed those of Sponsored Ads, offering businesses unprecedented control over their advertising reach. This granular location targeting can be combined with demographic data to create highly specific audience segments.
The platform’s timing controls allow advertisers to schedule campaigns based on optimal viewing times and dates, maximizing the impact of their advertising spend. This temporal targeting can be particularly effective when combined with device-specific advertising, as businesses can reach users on either mobile or desktop platforms depending on their browsing habits and preferences.
Audience behavior tracking and segmentation capabilities provide deep insights into consumer preferences and actions. The system can identify and target in-market audiences who have demonstrated interest in similar products or services, while custom audience segmentation allows businesses to create specific target groups based on various behavioral and demographic factors. Additionally, advertisers can control ad frequency at the individual user level, preventing ad fatigue while ensuring optimal exposure.
Criteria for Choosing Amazon DSP
1. Business Readiness and Current Amazon Presence
Before venturing into DSP, businesses must carefully evaluate their existing Amazon advertising performance. Organizations with minimal experience or investment in Sponsored Ads should focus on building a strong foundation in these basics first. DSP works most effectively when integrated with an established and successful Sponsored Ads strategy, creating a cohesive advertising approach that takes advantage of both platforms’ strengths.
Understanding DSP’s capabilities and limitations is crucial for success. Many businesses initially misinterpret DSP as merely a retargeting tool or directly compare it to Sponsored Display ads. However, DSP offers a much broader range of capabilities that require proper education and research to utilize effectively. Companies should invest time in learning about the platform’s features and potential applications before making an implementation decision.
2. Product Portfolio Analysis
The nature of your product portfolio significantly impacts the potential success of DSP. For durable goods, successful implementation of DSP typically requires products priced at USD 35 or higher, as this price point helps justify the advertising investment. These products may also have a longer purchase consideration cycle, allowing advertisers to engage with potential customers throughout their decision-making process. Think of someone buying a dishwasher for $600 – they will be doing ample research and shopping around, reading reviews, and considering multiple options before making a purchase. The potential for developing brand loyalty through repeated ad exposure plays a crucial role in determining DSP efficacy.
Consumable products present different opportunities and considerations for DSP implementation. Products that naturally lend themselves to regular repurchasing patterns can benefit significantly from DSP’s ability to keep brand awareness top of mind and encourage repeat purchases. The potential for converting one-time buyers into repeat customers through programs like Subscribe & Save adds another dimension to the value proposition. There are businesses selling on Amazon who consider SnS subscriber count to be one of their north star metrics. They should consider DSP. When evaluating consumable products, businesses consider the total customer lifetime value rather than focusing solely on individual purchase values.
Catalog depth and diversity play a crucial role in determining DSP effectiveness. Businesses with diverse product catalogs can harness cross-selling opportunities to maximize the value of their advertising investment. The ability to promote related products to existing customers can significantly increase the return on advertising spend through cart building and people coming back to the brand after having a good experience with the first purchase.
3. Seasonal and Timing Considerations
Unlike always-on advertising channels, DSP campaigns require strategic timing for maximum impact. Seasonal planning plays a crucial role in campaign success, with businesses needing to consider both peak shopping seasons or holidays, and industry-specific timing factors. Pre-season awareness building becomes particularly important for products with strong seasonal demand, allowing businesses to establish brand presence before the peak purchasing period begins and ad inventory is expensive or constrained Counter to how most businesses run Sponsored Ads, it’s totally possible to
Post-season retention strategies can help maintain customer engagement and encourage year-round sales, even for seasonally-focused products. This approach requires careful consideration of market conditions and customer behavior patterns throughout the year. The ability to adjust campaign targeting and spend levels based on seasonal demands provides businesses with the flexibility to maximize their advertising impact during crucial periods while maintaining cost-effectiveness during slower seasons.
4. Creative and Resource Requirements
Successful DSP implementation demands a robust creative infrastructure. High-quality images and even video content serve as the foundation for effective campaigns, requiring businesses to maintain a consistent pipeline of fresh, engaging creative assets. Regular creative updates prevent ad fatigue, maintain audience interest, and allow for A/B testing – at least as possible as that is within the Amazon ecosystem. Since there are multiple ad format variations, we’re able to do a lot of testing and optimization.
Companies must either maintain an in-house creative team or partner with an agency experience in churning out content suitable for DSP, which has a real learning curve, to ensure consistent content quality and availability. Technical expertise for implementation and ongoing optimization is equally crucial, as DSP campaigns require regular monitoring and adjustment to maintain performance.
5. Data and Measurement Infrastructure
Effective DSP use relies heavily on data management capabilities. First-party data like customer lists and email subscriber data can be layered on top of existing targeting and campaign optimization. Implementing proper website tracking with the Amazon Advertising Tag (AAT) allows businesses to monitor customer behavior on their own website off-Amazon, and feedback campaign performance to DSP so that it can make adjustments to the active campaigns. The two feed off each other in a positive feedback loop. Amazon is very picky about privacy, so this has to be done correctly.
Performance measurement requires a clear definition of key performance indicators (KPIs) that align with business objectives. Regular monitoring of these metrics enables businesses to adjust campaigns for ideal performance. A comprehensive ROI tracking system helps justify the investment in DSP and guides future campaign decisions. In many cases, DSP, a 3rd-party software tool, or advanced use of Amazon Marketing Cloud are the tools to fill those gaps.
6. Budget and Competition Considerations
Strategic budget allocation must account for the competitive landscape across different advertising platforms. Businesses need to carefully evaluate how Amazon DSP fits into their overall digital marketing strategy, considering the relative performance and cost-effectiveness compared to other platforms like Meta, TikTok, or Google. No business, not even one with most of its revenue coming from the Amazon marketplace, exists in a vacuum.
The amount you’re willing to invest should be determined by minimum viable budget requirements for effective campaign operation. Scaling strategies must be developed to ensure sustainable growth as campaigns prove successful. You must start to climb the ladder rung by rung as you scale spend and experiment with new audiences and creative, the two biggest levers impacting DSP. Long-term investment planning helps businesses maintain consistency in their advertising efforts while allowing for strategic adjustments based on performance data. At the end of the day, Amazon DSP is pretty flexible in how it permits you to shift already allocated budget towards different campaigns, so just because your project is for a level of spend doesn’t mean you’re stuck with it.
Conclusion
If you find yourself reading these criteria and nodding along in agreement, you might be prepared to invest in Amazon DSP as the next frontier of your advertising efforts. DSP isn’t right for everyone, and each business has to evaluate how it fits into its unique product catalog and circumstances, but its potential for scale and reach is massive. With proper preparation and careful execution, Amazon DSP can become a valuable tool in your digital marketing shed.
For businesses that meet the criteria discussed and are prepared to invest in both resources and strategy, Amazon DSP is worth trying. Remember that DSP implementation is not a one-size-fits-all solution. Each business must carefully evaluate its unique circumstances, goals, and capabilities before deciding to incorporate DSP into its advertising strategy.
