Joe Swallen, chief research officer at Kantar, said that while Amazon is becoming more of a product company, it also has to invest more in defending its own turf because Walmart, Target and Best Buy are stepping up promotion of their online commerce businesses.
“Even with its massive customer base and dominant share of online sales, Amazon needs to spend heavily on advertising to counteract the expanding focus of traditional retailers on e-commerce,” he said.
Much of that is going to television. According to Kantar, Amazon spent 37 percent, or $679 million, of its U.S. ad budget last year on TV ads, up from 32 percent in 2015.
That’s where Amazon can reach a wider audience, even if targeting and measurement is less sophisticated than on digital channels, said Harikesh Nair, a marketing professor at Stanford University.
“TV still provides high reach, making it good for building awareness rapidly,” Nair said.
Promoting its brand to mainstream America is important because Amazon has expanded into so many different areas, including hardware, grocery stores and entertainment. Google, Microsoft, Walmart and Hulu are all competitors and require Amazon to broaden its spending, said Carl Mela, a marketing professor at Duke University.
“To build share in these markets requires a substantial marketing investment,” Mela said.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.
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