Prime Day and Amazon’s New Flywheel: Media, Advertising and Commerce

Prime Day and Amazon’s New Flywheel: Media, Advertising and Commerce

Facebook, Google and Amazon are engaged in a game of thrones—an epic battle for digital supremacy. The anointed one will be whichever company stakes its claim to all three coins of the digital realm: media, advertising and commerce.

For years, it seemed that Google or Facebook had the inside track with their gigantic media platforms (YouTube and Facebook) and correspondingly huge advertising businesses. Each dabbled in various commerce initiatives but never quite managed to lock down that third pillar.

Amazon flew under the radar during this time. While clearly dominant on the commerce pillar, Amazon was just a blip on the media and advertising side of things—until recently. With the surge in Prime Video viewership along with its fast-growing advertising business, Amazon now seems better positioned to synchronize the three digital currencies. Amazon’s newfound position gives it yet another flywheel effect to fuel its growth going forward—and Prime Day is the perfect accelerant.

Prime Day is first and foremost about commerce, a day of huge discounts and attractive deals designed to reward Prime members and get them to spend. That’s why, during each of the past few years, Amazon has boasted of Prime Day generating record levels of new Prime memberships. We expect that Prime will reach 65.0 million households this year, surpassing 50% penetration for the first time.

And Prime membership is the fulcrum on which Amazon’s commerce flywheel spins. By financially—and psychologically—committing to Amazon, customers are more likely to turn to Amazon to fulfill their shopping needs. According to Consumer Intelligence Research Partners’ (CIRP) Q1 2019 report, US Prime members spend an average of $1,400 annually on Amazon vs. $600 for nonmembers. Prime members’ habitual shopping and buying behavior only adds more fuel to the fire.

“The increase in high-value traffic and sales, particularly from Amazon’s loyal Prime member audience, generates incremental product exposure, which can lead to net new customers and additional sales and, in turn, potential growth in reviews and increased organic positioning,” said Dani Nadel, president and COO of pricing intelligence firm Feedvisor. “With advertising added to the mix, the flywheel accelerates. When other customers shop on or after Prime Day and discover the products they are considering in the top search positions, as well as the positive reviews and ratings for them, the sales velocity amplifies as a result.”

It's unsurprising then, that advertising on Amazon ramped up considerably in the lead-up to Prime Day last year. According to data from marketing intelligence firm Jumpshot, the share of product listing views driven by sponsored search had its biggest increases in May and June, the two months leading up to Prime Day. The promise of a big sales boost drives sellers to lean into advertising on Amazon.

Prime Day generates a frenzy of shopping activity across the retail spectrum, but Amazon’s own products have historically led the way. This year’s top-selling product on Prime Day, both worldwide and in the US, was the Fire TV Stick, the 4K version of which was discounted from $49.99 to $24.99. Subsidizing consumer adoption of these devices strengthens Amazon’s hold on the living room while reducing friction to Prime members’ viewership of Prime Video content. That’s a big reason why Prime Video is now the No. 3 over-the-top (OTT) streaming video platform after YouTube and Netflix.

Amazon has done an impressive job in recent years of fortifying its respective positions in the current media, advertising and commerce landscapes. For consumers, Prime Day may be just a big sale—but for Amazon, it’s a massive, coordinated jolt of energy that propels its new flywheel forward.