Small businesses suffer from rising advertising costs on Amazon
Some of the more than 500,000 small and medium-sized businesses in the US that sell on Amazon feel that if they don't pay for expensive ads, people will never see their products.
Consumers, in turn, need to navigate through an increasing number of sponsored items while shopping, an experience some critics have described as misleading.
Year after year, Amazon sellers are giving up more of their profits to buy ad space, the Institute for Local Self-Reliance found.
Research published by the nonprofit in December estimated that merchants spent an average of 4,6 percent of their 2021 sales revenue on Amazon advertising, up from 1,1 percent in 2016.
Most Americans think of Amazon primarily as a shopping website. But the company has also grown into a digital advertising behavior, earning $31.2 billion by selling ads in 2021. https://t.co/90gl1AVJuT
— NBC News (@NBCNews) February 20, 2022
Bernie Thompson has seen the price of advertising on Amazon change since he started his computer accessories business. Plugable, the business he founded out of his garage in Bellevue, Washington, began running ads on the e-commerce site in 2014. Back then, he paid about 14 cents each time someone clicked on an ad. Now, each click costs Plugable an average of $1.60, according to data the company shared with NBC News.
For some small businesses, that can quickly add up to more than $100,000 a year. But Thompson said he has no choice but to pay if he wants to compete on Amazon.
“Today, if you don't advertise on Amazon, you can have the best product at the best price and no one will buy it because it will be in a pile of thousands of products that match that search term,” he said.
Most Americans think of Amazon primarily as a shopping website. But the company has also become a digital advertising giant, in part by charging small businesses to ensure their products appear at the top of search results.
Amazon announced this month that it made $31.2 billion selling ads in 2021, about $2 billion more than YouTube and nearly eight times Snap Inc's total revenue. Its ad business expanded 32% in the fourth quarter, making it one of the company's fastest growing revenue streams.
When Amazon's advertising costs and other selling fees increase, that could theoretically translate into higher prices for shoppers. They can't always find better deals on other websites, she says, because Amazon penalizes sellers for offering significantly lower prices elsewhere.
Miami Daily
Author: Patricia Chung 4:32 pm