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Hey everyone, Peter Crosby coming to you from the digital shelf institutes Cape Cod office. Rob is on from the Berkshires. Hey Rob.
So we're lucky enough to bring a big brain into our conversation today. Melissa Burdick co-founder and president of advertising platform, provider pack view, and overall e-commerce and Amazon whisper. Melissa, thank you so much for joining us today.
Thanks so much for having me delighted.
So Amazon just released earnings. They'd been through prime day as a kind of a holiday season, dry run. We've got you here because takeaways from all of the signals, some immediate actions, brands should take for improving their holiday results, as well as trends that give us a view towards 2021. And of course, we've got all the news from the earnings call, so let's just Corinne through all the stuff and talk through what it means. So I know they had another strong quarter. Melissa, what are the highlights from those from the quarterly earnings that brands should care about?
Yeah, I mean, there's, there's a lot of great stuff and I haven't listened to the full, um, call afterwards, but I started listening to it this morning. Um, but kind of the key takeaways are, and things that I think are particularly interesting. Um, so first of all, they had another big quarter. Uh, revenue was up at 37%. They beat estimates by 3 billion. Um, not bad operating income was also ahead of the street. Uh, and even though they had $2.5 billion of COVID expenses, they spent 4 billion the prior quarter, I think, and then two and a half, three Q, and then they said they would spend 4 billion in Q4. And that to me just says like, you know, the amount of investment that they're putting into COVID is, is amazing. And they did say that's their biggest fear, um, of, you know, how, how Q4 could go is just things around COVID and they're really investing and making sure that they're doing everything that they can do, um, to improve it
Because they're, they're really concerned that distribution centers will have to shut down or something if COVID takes hold of their distribution centers across the country. I mean, besides the health of their employees, of course.
Yeah. I think that, I mean, we're seeing numbers going up, you know, kids are back in school in some places of the country, not here in Seattle, I will say. Um, but you know, numbers are going up, you know, there's just a fear across the board. They're doing a lot of things to do more social distancing within their warehouses. Um, so just the effects that it could have to the community. I think that it's just, you know, as the case numbers increase, what does that mean? Yeah.
I haven't seen a tweet saying that, uh, their entire year in 2014 was, was beat by this quarter alone of revenue. It's stunning.
Yeah. I mean, the e-commerce demand that we've seen come online during this timeframe isn't amazing. I mean, and, and other interesting part too, was that Q3 was this back to school timeframe where actually the shopping for back to school was pushed out a little bit further because people were less certain, they didn't know where they're going to be going back to school, where are they going to be going back to offices? And so a lot of the shopping behavior was pushed into the later months of August and September. And so you could see that in the search term behavior as well on Amazon desks, um, laptops, blue light glasses. That was the new one for me. Apparently I need those.
Yeah. Um, I mean, and still a lot of PPE that was being bought, but those were the, those were the search terms that we were the search behavior we were seeing later in the months. Um, the other interesting thing about earnings was the advertising revenue. They exceeded expectations. So e-marketer had estimated 2020 at 14 and a half billion and they had underestimated Q3. I think that they're going to have to increase their estimate again, but advertising revenue was up 49% to 5.3 billion. And that's even with prime day pushed into Q4 prime day, you know, usually it's in Q3 and that's when people increase their ad budgets. So all that was without a prime day, which is pretty amazing,
The media, the media spike, if we want to just stay there for a second, that actually doesn't surprise me too much just from the conversations that I've been having with marketers, because COVID is disrupted live sports and disrupted a lot of television programming this year that, um, the advertisers were depending on and the major advertisers have been not signing up fronts. If their annual agreements have been up over the course of COVID and many of them like the Procter and gamble is, and mandolins is, and whatnot of the world have been shifting brand budget over to performance marketing and to retail. And so, I, you know, Amazon is the absolute number one place that would benefit from the brand budget shift to online Instacart's ad program. Again, it also launched in that same timeframe and it's just been making an astounding amount of money in a short period of time. And I think they're just, yeah, that, that one doesn't surprise me of all of them.
Yeah. I definitely think that, you know, people found themselves with maybe additional money advertising dollars this year because they weren't doing other things. And so they pulled it into performance marketing. And that, that we also started with Instacart because we work on that platform as well, um, that required, you know, incremental funding because it wasn't part of anybody's plan, uh, cause it kind of launched during the fiscal year. And so that, that was pretty interesting to see too, uh, and people really jumping into that new platform and seeing that takeoff, um, the other, the other two things that were interesting were around subscription services. That was up 32%. And that's where prime membership is. One of the things they put on the call was that prime video content was consumed at a, you know, lots of consumption there, which isn't surprising to everyone's home watching content.
But specifically as a side note, something that I noticed was they released bhorat, uh, onto prime video and they secured the streaming rights for that in September. So pretty late and bypass the theaters, which is kind of the new way that movies are going to market in this COVID timeframe. And it'll be interesting to see how much of that sticks and you can't actually rent that movie. You have to be a prime member to view it. And so that's just another way to get, you know, more and more customers. And there's been a lot of controversy around that movie. Um, and then the last one that I thought was interesting that they called out was allow around grocery sales, continuing to accelerate, and the fact that they have pickup available at all the whole foods stores now, which that that's been something I think is going to be pretty important during, uh, you know, the, the holidays and Thanksgiving. And it's going to be a format that is going to be pretty important for people who don't want to go into stores and shop that they're going to want to pick up. So those were, those were the observations I had. What about you guys?
Well, I mean the big thing is they just, just keep printing money. Um, but I want to, I want to actually go back to a couple of those points that you made and speculate a little bit, if we can have a little fun doing that. So I'm a subscription services I hear and I'm just going to put my skeptical cap on, I hear the, the boar at driving prime membership, and I think come on, that's, that's Amazon having put, uh, you know, money and time to promote a particular movie and media event and saying, this is, this is, this is part of the whole prime strategy. It's helping prime membership. Prime membership was boosted because of it. It's, it's a little, it's just a little bit hard for me to actually assign meaningful prime membership, uh, growth to the bore at the movies. So how much, how much of that is, is really growth due to, uh, you know, really effective media investment versus just a little maybe Rosie glass posturing.
I don't know. I mean, if you've, if you've listened to the podcast, the land of the giant podcast, have you, have you guys listened to that one? Um, this, this one is on Netflix, the seasons on Netflix, and it really talks about how they, um, the rise of all these actors that weren't well known that built all these shows on Netflix and their own. Um, you know, the one I listened to last night was about, um, they knew that the networks weren't going to be able to get the network shows and they'd have to create their own content to keep subscribers. And so that's why they've had this explosion of their own content and they've, they've, you know, their best shows are kind of their own content. So there's something about like creating content that does have that viewer base. And so, and Jeff Bezos says things like, you know, more people watching shows are gonna buy more toothpaste. I dunno. Something like,
Well also I saw, I saw a report that, um, over the last, um, Netflix has raised their prices four times and I've forgotten to stretch a time, but not that far apart. And over that time, none of the other major, major streaming services have raised their prices. In fact, most of them have had to drop and I, there is something about exclusivity and also real control over your own content that, you know, that, that there's, there's something to that. And it adds value to the package. I don't, I agree with you, Rob, I don't know that Amazon is sort of really clean on it and said, Oh, and we saw a ton of people join prime because of it I'm skeptical that that's true.
It just felt like the, it just felt like a place to call out, like, Hey, we've got the bore movie come and see it. Um, yeah. So, but yeah, I mean, Netflix has just done a big price. Like the premium version of it is now 18 bucks a month. I mean, that's substantial. Yeah.
I gotta keep the, yeah. The first movie I think, released in 2006 and made $262 million. So $262 million worth of people wanted to watch that first movie.
That was the height of Sasha Baron Cohen. No, that was coming off of his TV show and all it's been, it's been a long time. It's hard when, um, when, when an artist releases an album and then like 30 years later, they release another album. Right. And how many people are going to go back and, and all that sort of stuff
Liani was tucking in his shirt. I think there was a lot of news around that movie and yeah, there's a fair amount of the country that would want to see whether it was talking about a shirt or not.
Yeah. That's fair enough. Okay. So then the, the, the, um, okay, so maybe we give them the hat on their subscription growth on this thing.
Well, thanks for your skepticism. I think it's, it's, it's somewhat, somewhat boring.
It's it's, I mean, you know, Amazon is just crazy, cause they're like in a billion businesses, so they can use their platform to push a particular point of view. And ever since Amazon has gotten all this congressional attention, you know, Bezos can't open his mouth publicly without talking about all the small businesses that are built on Amazon and how 60% of their market is three P sellers winning on Amazon and, and all this growth. And let me, it's like, you know, he's using his, his, uh, podium effectively for his own ends and in a way that is pretty thoughtful. Right? And so you see these announcements and I just try to tease apart. What's what's real and what's what's posturing. And, um, what's the motivation it, and I'm just, that's where that level of detail is that I'm trying to get to there
Actually, that you bring up. Another point that I forgot to mention was around the three-piece seller growth. And that also was pretty significant. That was up 53% and three piece sellers are more profitable than one P. So that also helps Amazon's bottom line around profit, AWS advertising. Um, those also contribute. So, yeah, so I forgot to mention that about three P sellers super active,
Interesting, and all the other retailers are watching that too. And you know, that a marketplace platform company miracle raised $300 million relatively recently. And, uh, every, just in the same way that everyone wants an Amazon advertising part of their business, everyone also wants a marketplace part of their business because they see the margins. The margins are crazy good for Amazon, and they're doing huge volume there. Um, so, Melissa, I can tell you're not a video gamer because you didn't mention Twitch's growth.
I leave that to my nine-year-old to play all the video games in my house. I have enough video games.
The only Twitch I know about is the one in my left eyes. So that tells you where we're at these days. So
And Google just did their earnings and YouTube advertising was up 32%, I think, in the, in the last quarter. So it's, uh, everyone's pouring their money into search because it's now or never to make your holiday dreams.
Everyone's moving money from TV to these other channels. Snap is profitable. Twitter was up, you know what I mean? All of them, if you're a digital advertising marketing company with a good audience, you're, you're, you're making money right now.
How, how much of this behavior do you think is going to stay? I think that's the big question.
Well, you know, it's actually interesting. So one of the points that you made up and I, I want to, I want to ask you, this actually is, for me, I used to love going into whole foods is an experience. And in recent, even, even before COVID, it had become pretty annoying because it's filled with all of these Amazon fresh shoppers that are, that are doing the picking out of the Isles and it just becomes miserable, right? Cause it's always packed. These people are in a hurry. They're bumping into you and they're unapologetic and whole foods. The experience has really declined here. Um, and the ultimate expression of that would be to change these things ultimately into dark stories, almost where you're focusing on pick on, uh, you know, buy online pickup in store. And you were saying that now all of the whole foods support, click and collect, um, which I actually, I had that completely, that's pretty big news there. And I wonder in terms of stickiness, I mean, Melissa, what do you think, do you, do you think that that particular trend is going to stick? Do you think it's going to be click and collect forever? Or do you think that whole foods is going to go back to investing in store experience?
I really think people still want to go to the store. Um, I had a similar experience, but at an Ulta during COVID, I mean, anytime I go there, like now online is better than the in store experience because everything's taped down, you can't see any format or samples or color for cosmetics. And so there's, and the inventory is awful. Like there's no inventory available. Um, they're out of stock on a lot of things. And so that experience is a lot better online now with investments in virtual reality and things like that, to be able to virtually try on that, why would you go to the store when you're, you can, you have to wear a mask and you can't even drink your Starbucks coffee in the store anymore, um, with your mask on. So, the at-home experience is better. And so as we create better experiences with virtual try-on, you know, that that's where, you know, the innovation I think is going to help figure out are we going to have more of this sticky behavior where we just go to the store and pick it up because we want it like, right this very minute and Amazon can't get it to me in an hour or something like that, because it's some product that they can't get to me in an hour.
Yeah. But I think back to our recent conversation with John, learn from alert innovations, uh, the robot, the robot, the robot company, and a little, I don't know if you're familiar with them, but they've got a system where, uh, you essentially, uh, build how to pack up. Um, [inaudible]
Like spider monkeys just like filming centers. So essentially
Fulfilling in the back of the store, all this stuff that you don't necessarily need to keep in the front of the store to have a great experience and that that's going to free up. So someone will come in and sort of have already, maybe done their, their basic shopping. Uh, online robots are in the back sort of putting that all together for them. You no longer have mad, um, online shoppers trying to put together your deliveries for you, but people come in to the front of the store for the experience at a whole foods or somewhere else where instead you're learning about recipes or, or sampling cosmetics or whatever that might be. So that the store transforms into a place you really want to go to discover rather than to madly try and grab it. The things that you already knew, most of which you wanted already,
It's basically take, take the, take the center aisle and put it into an attached micro fulfillment center that has these robots. And then with a center with the center aisle gone, do wine tastings and things, right. Is that the thesis there where you, you sort of, um, all the replenishment purchases are just done digitally and the ones that you stay, you still do on your own or the fresh and the experience. And I will say, I think that under T to your big question, what's going to stick. I think it's hard to know from the consumer experience perspective. Um, I'll tell you, one thing that's been interesting about our company is that, you know, back in may, uh, we surveyed the employees and said, you know, how many of you are going to want to come back into the office after a vaccine? Um, how many you like working at home and how many just want to work at home forever and all this sort of stuff.
And the number of people that wanted to work for home forever was a very small single digit percentage. People generally want it to get back into the office, but then, you know, every couple months we'll bring, run the same survey, and now we're in October. And a lot of people are like, you know what? This is pretty good. I'm going to stay at home. Especially once the kids go to school, hashtag sweatpants forever. And, and so I, there's a there's it's for me, it's been really hard to predict the consumer behavior changes that I want to ask you about, which is, uh, the media behavior. Cause you guys are right in the middle of just this giant fire hose of media dollars going down the line. And for me, that feels like it's going to stick because it's, so my point of view, the ROI that I've seen on these channels, it's so much better than TV and you can actually measure it. And so like, why wouldn't that stick? And what's, what's your view there?
Yeah. I mean, I, we definitely are seeing an influx. The ad budgets are increasing year over year, every year. I do think that, you know, still there is this need for people to do more upper funnel marketing, and maybe they're going to do more formats like Tech-Talk to help them with that versus TV or OTT, you know, things like that, where, um, they're going to be doing some, some still leveraging the Amazon advertising family of ad products, not Tik TOK, obviously. Um, yet we'll see what happens with tick-tock. But, um, I do think, I do think that leveraging the audience behavior, being able to target them everywhere, they have a few things in play like Amazon attribution, which is the ability to measure your off of Amazon advertising on Amazon, um, that they're really trying to, to grow and grow, create more functionality. The other thing is I haven't seen as much innovation and as I have in the last few months around Amazon advertising, like they're launching features really fast right now, which is not, you know, at a faster rate, which again is another, you know, amazing thing about Amazon is that they've been able to innovate during this time when, you know, everyone else is pretty much trying to figure out how do we like, hold on and how do we grow?
They're actually innovating and creating new products and you know, all of that kind of stuff. So there's a lot of growth in their API. Uh, finally there's a DSP API, which is amazing. That's been kind of the promise for multiple years and finally we have it. So this is to tie DSP and that'll be like a self-serve option. And so, um, and really the big picture that we see at path view is this ability to optimize your advertising across retailer platforms, Amazon Walmart, Instacart, Kroger, target, um, all that data in one place. And then being able to understand your metrics and KPIs and place your dollars and your bets, where there's less competition, where there's more impression, volume, you know, being able to understand on maybe the Walmart platform, these products perform better on Amazon, these products perform better. So really being able to automate optimization across these platforms. I think that also opens up dollars because people can really understand the KPIs and tie the measurement. And that's only possible when you have data and attribution.
Yeah. One of them, I want to really focus in on the attribution piece because I also saw this, this story today, or, um, tech crunch had a story recently about, they're sort of trying to, they're paying consumers, uh, to tell them where they bought, like their consumers can make money by telling Amazon sort of, I searched on Amazon, but then where did you buy? So there's sort of setting up these consumer panels and I feel like we've had such a ton of conversations on the executive forum around how do you kind of really measure the impact or the offline impact or, or other platform impact of your Amazon ad spending. And I think Amazon starting to get smart about trying to help them with that attribution is only going to, to your point, free up more dollars.
Yeah. They just, they just launched a shopper panel. Is that what you're talking about? Yeah.
I mean, short of automating the market mixed model studies, you know, including Amazon advertising in the mix, which a lot of companies don't do. Right. Um, but you know, the other one that's very similar to that I think is interesting. So a lot of these retailers specific advertising systems, you know, roundel or whatever, I think you can more effectively just use the Roaz as on the specific channel and get closer to what the actual return is. Um, but Amazon is pretty clear that a lot of the ad spend is just overall market visibility. You know, you use Amazon as a search engine and then you end up buying in store. Instacart's the other one, Melissa, you guys are, you guys got an early working with Instacart on, on the ad program there. Yeah. That one strikes me as like with Instacart and a lot of these other grocery oriented web experiences, people will tend to rebuy the same things over and over again.
So winning that first search and purchase basically wins you the consumer for a long period of time and calculating the return on ad spend. It is also complicated for exactly that reason because you shouldn't be, you shouldn't be calculating it on a purchase by purchase basis. You should be calculating it somehow on a lifetime value through customer basis. And I don't, I don't know how you do that. I mean, when, when, when you can talk to folks about their Instagram programs, then are people looking at it that way right now? Or, or, or was it just an opportunistic way to funnel money to digital during COVID?
Um, no, I mean, I think what you're, what you're talking about is pretty sophisticated and, and folks aren't quite there yet. I think what it is when these new platforms launch is the very first and foremost thing people are figuring out is how do I win on this platform? Because each of them are very nuanced and different. And so on Instacart, it's really trying, it's a very different, you know, given there's all these different stores, um, how do I win what's you can take a lot of the learnings from Amazon, for example, cause it's also a second price, but auction. Um, whereas Walmart's is the first price. So the very first thing that people in, what we've seen actually as an interesting thing, when, when Walmart first launched in February was that people still needed a lot of handholding and help, even though they were, they knew how to run Amazon really well.
There were just all these nuances. So I think at this point right now, what we're just helping brands with is like, how do we win? How do we structure our, you know, like just kind of the basics and then it's getting more into the advanced strategies. Um, the optimization stuff is still not quite there yet because it's really just in this onboarding phase and learning. Um, I think that's going to be more 20, 21 that people start thinking about that, but it is one of the things we use share a voice as a metric that really helps us understand a benchmark of how has this, where is this brand organically and paid on these platforms to get at benchmark and understanding, you know, and then that that's kind of the first KPI. That's super helpful to brands across their platforms.
So I have to leap in here and sort of make a combo DSI slash Melissa Burdick plug because on November 5th at 1:00 PM Eastern Melissa, me, John Denny, former VP of digital and e-commerce at Beiber and Samaca rhino Herrera, e-commerce performance marketing media team lead at RB and Jim Morgan head of e-commerce at Vita Coco, just like, just take that group. And we're going to record a live great debate podcast on whether to agency or not to agency your retailer ad programs. It's going to be an Epic conversation. You can join us as a live audience. We'll be recording it as a webinar, but then we'll be putting it out as a podcast as well. So the link will be in the show notes. Don't miss it. It's going to be awesome. Um, so let's do before I let you go, uh, I definitely want to make sure we don't go away without covering prime day. So it moved into October mushed together, their biggest single shopping day, as well as an early to the holiday season. Can you just give us the highlights of, um, of how prime day went and any takeaways for our brands when they think about adjusting their plans for the holiday season?
Yeah, I mean this prime day was a little bit different. I mean, we had a lot of our clients, I don't know about you guys, but a lot of our clients didn't participate this year because Amazon didn't release a lot of details, which led them a little bit uncertain how they should play prime day in their Q4 strategy. And because they'd all had such amazing, you know, years with e-commerce accelerating a lot of them, you know, opted maybe not to participate as much, but, um, so that that's one, but we did see ad revenue, even if they participate or not. And that's just in deals ad spend increased significantly for prime day this year, it was up 311% on the first day and 263% on the second day. Um, so it, it was, it was significantly up the thing that I would say our team really took away.
Yeah, it was, it was, uh, I know this to think about what ad revenue is going to be for Q4 is going to be like even even higher, um, given prime day left in there and it kind of pushed the whole holiday season forward. Right. I mean, that's why that's why prime day was pushed into October. And the first place was just to try to push some of that demand forward to help them ship again on, should we get in, should we get in? Um, but the other thing that we noticed that was a really good takeaway for people to know about Q4 is that we saw a lot lower conversion rates. I mean, this is not rocket science, but if you didn't have a deal pulled into your ad, the conversion on that was way lower. So, you know, really tying your promotion to your paid search performance or your paid search plan is really key. So, um, some of our account managers would go as far as to say, if you don't have a deal, maybe don't, don't advertise that item because it's just really not going to get good conversion and return. Um, but you'll get impressions, maybe not click through rate that that was kind of what we saw.
That's great. Well, Melissa, uh, to close, I, you just mentioned ship again, which is one of my favorite hashtags for the holiday season. I mean, we're just seeing this, I hesitate to even call it a perfect storm. It's so horrible. It's like an imperfect but amazing storm of just everything going through the supply chain at once. And I saw a tweet last week from delivery tech provider con convey that FedEx and DHL are no longer accepting new merchant customers to the end of the year. Um, and, and that's just sort of one small symptom of is anything gonna get shipped, you know, through, you know, how, when should you get your orders in, when should you be planning your, your promotions and campaigns because, uh, things are going to get jammed up don't you think [inaudible]? Um,
So I do think, I think in the earnings call, or maybe in the press release Jeff Bezos highly recommended people buy their holiday items early this year. Um, and then, uh, I also did get a chance to talk to my, my good friend, David Gluck, who's the CTO at flex, um, because this is his area of expertise. And so I'm gonna, uh, give him credit for this recommendation, which is to have access to the regional carrier, um, in the best way to do that is via transportation aggregators like coyote logistics, or convey. And there's also potential they could use FBA, but, uh, you know, Amazon, they've already shut that down for customers who haven't done that yet. And my last thing that I'm going to say is I think the true winner of, um, holiday is going to be the Amazon gift card, because I think that there's going to be a lot of people who they're gonna, you know, still know that there's gonna be this to get in problem, but then realize it really when it's too late and they're going to even, I mean, how they give cards are always big, but I think that even more so this year, and then the benefits of Amazon is that there's always people who don't spend their gift card and I'm, I'm going to raise my hand, say I probably have 20 gift cards in my house that I don't know where they are and haven't, haven't spent them and people bought them for me.
So I'm going to say the true winner this year is going to be, um, a lot of things, but the Amazon gift card, what do you guys think?
I think the true winner is that, uh, I can stay home for Thanksgiving. I mean, I love my family, but I'm looking forward to just having a meal. Awesome. No, I think that's fair. Go ahead.
You're you and tens of millions of other Americans that are secretly happy that the, the true winners it's like Thanksgiving is the greatest holiday of all the holidays record publicly saying it in so many places,
Naps football and food like, Oh yeah,
You cannot beat Thanksgiving. And on top of it this year is like, you don't have forced travel in for socializing. And if you're introverted like me, that's like the greatest, it's the greatest gift, but yeah, Melissa, I'd say I love the Amazon gift card call out. That is, yeah. That is not one that I would have thought about, but man, you are so right. I struggled to come up with anything that even competes with that. That's it? That's a brilliant little idea.
Yeah. I mean, I still, you know, Rob knows I'm a warrior. And so I, I think, um, you know, if COVID spikes continue and Amazon has to pivot more to essential oils again, I mean, it's just going to be a continued time of uncertainty. And so the sooner brands active to try and drive their sales sooner and the faster consumers get, get their things done. I think the better off everyone will be. Absolutely. So Melissa, we really can't thank you enough for bringing your brains today is awesome as always super grateful. And we look forward to, uh, to the great debate to come on November 5th. Um, so thank you very much for joining.
Thanks for having me looking forward to it. Of course.
And, uh, thanks for all of you who are listening for being part of our community.