COVID-19’s Impact on Amazon Sponsored Products

In April, Tinuiti released its Q1 2020 Amazon Ads Benchmark Report, which provided many actionable insights around COVID-19’s impact on Amazon advertising⁠, especially with Amazon Sponsored Products. The results come from anonymized data of over $400 million annual Amazon ad spend under Tinuiti’s management.

Take a look at some key findings about upward trends surrounding Sponsored Products and Sponsored Brands, along with the negative effects of the coronavirus and why brands need to be prepared to react quickly.

Before and After the Coronavirus

Spending on Amazon Sponsored Products grew 24 percent year-over-year in Q1 2020, and clicks increased by 14 percent from the previous quarter. More importantly, sales were up 19 percent from Q1 2019. Sponsored Brands were also seeing success, with spend growing an incredible 47 percent year-over-year for the quarter, representing a substantial increase from the 27 percent spend growth seen in Q4 2019.

News of the coronavirus began in January and February, but mid-March is when the pandemic began to impact North America. Its effect can be most notably seen in the last week or so of the quarter. As inventory, fulfillment and consumer demand issues surrounding COVID-19 emerged, Sponsored Products slowed to just 6 percent spend growth in the last week of March. Naturally, conversion rates declined at the end of the quarter, which led to slower cost-per-click (CPC) growth.

‘Rest of Search’ Affecting Ad Impressions

When the coronavirus reached the United States, many advertisers rushed to dial back spending while Amazon made some crucial changes of its own. For most of the quarter, ad impressions grew by 20 percent to 40 percent, but COVID-19 dramatically affected the final numbers, with ad impressions declining more than 30 percent year-over-year in the last week of the quarter.

Ad impressions were primarily affected by some changes to the products that are featured in search results but not at the top of the first page. These are called "rest of search" placements and they went from representing about 85 percent of Sponsored Products impressions to accounting for 65 percent beginning on March 21. It seems that Amazon made these modifications in reaction to fulfillment issues and changing consumer necessities.

Credit: Tinuiti

Luckily, this change didn't have a significant impact on advertisers’ ability to invest in Sponsored Products because click growth remained relatively steady and the reduced ad inventory seemed to come from the "rest of search" placements that weren't generating many ad clicks.

Stay Prepared for Dramatic Spikes

When the initial social distancing ordinances and brick-and-mortar closures started to roll out, Amazon shoppers converted much more quickly. Between March 11 and March 20, 87 percent of Sponsored Products conversions happened within 24 hours of the ad click. After that date, conversion rates returned to normal to finish out the month. However, another example of why brands need to stay ready falls just outside of Q1 with the arrival of government stimulus checks.

When the stimulus checks hit bank accounts on April 15, sales attributed to Amazon Sponsored Products spiked 41 percent and sales remained elevated on April 16.

Credit: Tinuiti

Advertisers that are financially able to maintain inventory should not dramatically reduce their ad spend; they need to be able to seize on short opportunities like this or the surge in performance during the initial onset of COVID-19 because it can be indicative of what consumer spending will look like when the economy begins to normalize.

Pat Petriello is director of Amazon strategy at Tinuiti, a performance and data-driven digital marketing leader.