Amazon has long promised that Alexa will be ad-free. Now it's ramping up its pitch to marketers for audio ads.
- In an about-face, Amazon is ramping up its pitch for audio ads on Alexa, according to three agencies who recently heard the pitch.
- Amazon had started to test the ads, which run in Amazon Music, last year.
- Audio ads are part of Amazon's effort to show that its platform works for advertisers interested in growing brand awareness.
- According to one agency that's testing Amazon audio ads, the ads require a minimum of $50,000 in ad spend. Another ad agency exec said that CPMs for audio ads cost 30% to 40% less than Amazon's streaming TV ads.
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Amazon is doing an about-face and ramping up its pitch for ads on Alexa after saying it wouldn't run ads on the smart speakers.
Last year, Amazon quietly started testing audio ads in Amazon Music, its ad-supported music streaming service built into Alexa. Amazon is now making them a bigger selling point, three agencies who have received Amazon's pitch in recent months told Business Insider.
One agency said Amazon started pitching them audio ads in September. Another said that Amazon plugged the format in the past couple of weeks as part of its advertising business that includes search, video and programmatic advertising.
The ads are limited to Amazon Music and do not play elsewhere in Alexa, including the mini apps - or skills - that publishers and marketers create.
"I literally gasped," said an executive at the agency who spoke on background because of its close ties with Amazon. "I was truly shocked because Amazon has made such a big deal about not using [Alexa] as an ad platform for so long."
Amazon did not respond to a request for comment from Business Insider.
Amazon is playing up audio ads as a branding tool for marketers
Amazon explains its advertising business to marketers as a funnel. At the top are formats aimed at helping marketers build brand awareness and product loyalty. Search ads aimed at getting consumers to buy products at the moment on Amazon are at the bottom of the funnel. One agency said a pitch deck described audio ads at the top of the funnel along with OTT and Kindle ads.
The focus on branding is important because Amazon has been trying to demonstrate that it works for advertisers that don't sell items on Amazon but want to increase awareness of their brand.
"It is a true strength that they can act on every stage of the funnel - that's what they always bring it back to," said the agency exec who recently received the pitch deck.
According to two media buyers, audio ads are pitched in decks that are part of marketing for Amazon's demand-side platform (DSP), the media-buying software that advertisers use to buy ads on publishers' websites. Advertisers use the DSP in two ways: Big brands work with an Amazon rep to buy campaigns through managed services and smaller brands do it through a self-service approach. According to one agency, audio ads are only available through managed services and to small number of advertisers.
Audio ads require a $50,000 minimum, according to the agency source who's testing them. Another agency said that the presentation showed that the cost per thousand impression (CPM) for audio ads is 30% to 40% lower than Amazon's OTT ads, showing how much cheaper audio ads are than video ads. CPM costs for Amazon Fire ads are around $25 to $30, according to buyers.
Amazon is playing up its scale, but ads are low on targeting
In Amazon Music, advertisers can run audio ads that are 30 seconds or less, according to the agency that was pitched in September. For ads served to people listening to music on Amazon's website and app, the format includes an image. Amazon is using a campaign for Kellogg's PopTarts in its pitch deck, according to the agency source.
Amazon cited research showing that 74 million people in the US use a smart speaker to promote their potentially broad reach. However, the Amazon Music ads' measurement is limited and advertisers cannot target them, two of the agency sources said.
"Clients are saying this is interesting, but it's not an out-of-the-gate game changer," said one source.
One agency exec said that marketers would need to tread lightly with audio ads because Amazon execs have stressed that Alexa will remain ad-free in the past lest it turn off people who feel bombarded by ads.
Alexa has been a bigger focus of Amazon's ad push
In addition to audio ads, Amazon has been pitching advertisers on ways to promote Alexa in their commercials that run on Amazon Fire TV apps and its ad-supported IMDb TV streaming service.
In a recent pitch deck, Amazon promoted a format called "branded utterances" that puts Alexa branding in ads. An example with PepsiCo-owned Smartfood features a call to action prompting consumers to ask Alexa to order the popcorn. There is no minimum spend for marketers to make a "branded utterance," through Amazon is promising to cover the cost of creative work for advertisers that spend at least $750,000 on advertising, according to the deck.
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