Amazon Just Turned Everything Into An Ad. Even Your Reviews Transcript, AI Summary & Key Points

00:00 So, Amazon just reported earnings and their results should scare every Amazon seller out there. It's ad business grew more than five times faster than its online sales. Ads were up 11% but online store sales were just up 2%. So, you can guess where Amazon is putting its effort and the newest place it's selling ads is your reviews. Amazon now wants you to bid for reviews like a keyword.

00:24 But reviews are just the first piece. Amazon announced a much more invasive that at their conference last month and as someone who's been selling online for 19 years, that is the one that worries me the most. I'll get to it later but first, let's talk about the reviews. The new ad is called review requests and Amazon announced it at its big unboxed conference at the end of September.

00:47 Once someone buys your product, Amazon can show them a prompt on its busiest pages like the homepage asking them to rate your product with a single tap. You pay for that prompt the same way you pay for any other Amazon ad with a bid and a budget and this ad launches in November. Now to be clear, these are real buyers leaving real reviews. What you're paying for is Amazon asking your actual customers for one.

01:11 And if you've ever launched a product before, you know why sellers are going to line up for this ad. Power Reviews looked at over a million and a half product pages across e-commerce and the number of sales dramatically goes up as the review count climbs. Products with even a handful of reviews convert 52% better than products with none. Between 11 and 20 reviews, conversion is more than double.

01:33 And once you get past 100 reviews, it's up more than 250%. So, every time you cross one of those review thresholds, you sell more product. Now, normally getting there the free way is slow. I've used Amazon Vine. I've used the free request a review button and I put an insert card in every package asking for a review. Even after doing all that, it can take a month or more for a new product to get past 30 reviews.

02:01 So, I get why sellers want to pay to speed that up. But, reviews also matter for another reason now. When a shopper asks Amazon AI assistant which product to buy, it writes its answer from your listing, your customer reviews, and your Q&A. So, your reviews now do two jobs. Shoppers read them, and Amazon's AI read them to decide what to recommend. Review request ads are only for products with fewer than 1,000 ratings, and it shuts off automatically once you hit 1,000.

02:32 So, it's built for newer products and smaller sellers. Based on Amazon's early testing, products using it got about three times as many reviews per week. Now, Amazon hasn't announced what it'll cost yet, but it will be based on an auction, so it's going to cost whatever the market will bear, which is a lot of money. Now, here's the thing. Amazon isn't technically forcing anyone to run these.

02:54 But, if your competitor runs review requests and gets three times as many reviews every week, Amazon's AI has a lot more to say about their product than yours. So, you either have to pay, or you're going to fall behind. And that's how Amazon gets you to run it without ever making it mandatory. Now, Amazon has charged sellers for reviews before. The difference is how it charged them, and this is where it gets interesting.

03:19 Back in 2016, Amazon banned incentivized reviews, where sellers gave away free or discounted product in exchange for a review. The only exception was Amazon's own program, Vine. A little later, Amazon ran something called the early reviewer program. You paid Amazon $60 per product, and Amazon would ask your buyers to leave a review, and give them a $1 to $3 gift card for doing so.

03:44 You only got charged once the first review came in, and the program stopped after five reviews or one year, whichever came first. Now, I used the early review program back in the day. It was all right, but it was very limited, and a couple of reviews didn't really move the needle. Five reviews get you on the board, but it doesn't get you past 10, which is where conversions really start to climb.

04:06 In April of 2021, Amazon shut it down, and the official reason was that its free tools like one-tap reviews worked better. But, I personally think the real reason was money. The old program cost $60 once. You didn't pay unless you got a review, and Amazon could never make more than $60 off of any one product. Review requests, on the other hand, works like every other Amazon ad.

04:31 You set a bid and a budget, and it keeps running every week until you turn it off or hit 1,000 reviews. Nothing guarantees the money you spend turns into a review, and you're bidding against every other seller who wants reviews, too. Now, to be fair, review requests will probably get you a lot more reviews than the old system, but a flat $60 made Amazon almost nothing.

04:53 An auction that sellers leave running week after week makes Amazon a whole lot more. And that is the exact same playbook behind every other ad on Amazon, and the numbers on that are ugly. By the way, if you're interested in starting your own online store and not have to depend on Amazon for your sales, make sure you sign up for my free 6-day e-commerce mini course below.

05:12 100% free, and I guarantee you'll learn a ton. Amazon made over $68 billion from advertising last year, and that number is still climbing fast. In the third quarter of this year, Amazon's ad revenue hit $19.6 billion, which was up 11%. However, its online store sales only grew 2%. These are horrible metrics for Amazon sellers because it means that Amazon's ad business is growing over five times faster than its e-commerce business.

05:44 Which means that sellers are spending more on ads for every sale that they make. And you can see it in what a click costs. The average cost per click on a sponsored products ad went from 89 cents in 2023 to a buck 21 at the start of this year, which is a 35% jump in 3 years. And it hit a new record high in June. Plus, the ads keep taking up more of the page.

06:06 Back in 2021, sponsored listings already made up 43% of the top 10 results on an average Amazon search, up from under 20% 3 years earlier. In competitive categories, it's over 60%. Just go search for anything on Amazon today and just count how many ads you scroll past before you hit a regular listing. I pay for Amazon ads every day and my cost per click has gone up by the double digits every single year for the past 5 years.

06:34 So, Amazon has already filled up the search page, it's charging for reviews, and now it's moving ads into the place shoppers go when they want advice. So, these next ads I'm going to talk about are scary. Starting in January, brands will be able to pay to shape what Amazon's AI assistant tells shoppers about their products. Amazon's AI assistant is called Alexa for shopping and it's what answers when you ask a question in the Amazon app.

07:01 You might not have noticed, but it already has ads in it. The first iteration is called sponsored prompts. When you're browsing search results or a product page, Amazon shows you suggested questions about a specific brand like why choose this brand's coffee maker, marked sponsored. Tap one and Alexa starts talking up that brand. This is what a sponsored prompt looks like.

07:24 In this example, a search for organic cereal results in the prompt, what makes flakes from Nutrition Co a healthy choice, which leads to Alexa answering the question. Now, initially, Amazon let brands run them for free starting last November and then on March 25th, it started charging per click. Amazon says that nearly 20% of shoppers who tap one keep talking about that brand, which can result in a 6% lift in conversions.

07:51 Then in June, Amazon went further with this. You can now see an ad, ask Alexa questions about it, and finish the purchase without ever leaving the conversation. This month, they announced branded conversation ads. When a shopper taps a prompt like help me decide, Alexa runs a guided conversation using information the brand itself provides. And in Amazon's words, brands can highlight what makes them different and what sets their products apart from the competition.

08:19 Now, Amazon says these conversations will be clearly marked as sponsored, and that's good. But think about what that means. Once you tap, the brand is supplying what Alexa tells you about its own product. It's labeled, but it's still a sales pitch dressed up as advice. And I don't know about you, but when I ask an AI a question, I want an unbiased answer.

08:41 The more of that answer a brand pays for, the less I trust the AI behind it. And I'm not the only one. In a Harris poll this year, 75% of Americans said they'd trust AI shopping agents less if brand money influenced the recommendations. The same share said they'd trust the brands less, too. Now, what makes shopping through Alexa AI problematic for both buyers and sellers is that there's not much room for product mentions.

09:07 One analysis found Alexa recommends only about five products per answer, compared to roughly 50 on a normal sales pitch. So, when one of those spots goes to whoever paid, there's a lot less room left for the product that might actually be the best one. But here's what really gets me. 9 days before Amazon announced branded conversations, it blocked Meta's AI assistant Muse from shopping on its site.

09:31 Meta's AI assistant launched with no ads at all. Meanwhile, Amazon is filling up your conversations with paid placements. So, what are the implications for these new ad types for sellers, and who wins and who loses? Well, the biggest winner here is Amazon, obviously. Every one of these new ad products runs on bids and budgets, and all that money goes to Amazon.

09:53 The other winners are the biggest sellers. At Amazon's ad conference, the big agencies liked review requests more than anything else announced that week, and it's easy to see why. Their clients have the budget to bid on every new ad feature that Amazon builds. Amazon has been favoring sellers with deeper pockets for a long time now. Back in 2021, there were only about 50 sellers on Amazon doing more than a hundred million dollars a year.

10:19 Today, there are 235. Fewer than 8,000 sellers now make up about half of all third-party sales on Amazon. Couple years ago, it took about 15,000 sellers to get there. Meanwhile, the losers are the small sellers. Review requests only works on products with fewer than 1,000 reviews. So, every new product launch now comes with yet another auction attached.

10:43 When a brand doing a hundred million dollars a year launches something new, it can outbid you for every one of those prompts while you're still waiting on your insert cards. And fewer people are even starting to sell on Amazon. New seller sign-ups on Amazon fell 44% last year, the lowest number since 2015. So, should you run review request ads? Here's my take if you are not a hundred million dollar brand.

11:08 First off, wait until Amazon releases the pricing in November. You need to know what a review actually costs before you spend a dime on it. Second, max out all the free stuff. So, we're talking Amazon Vine, the request a review button, and insert cards all still work. They're just slow. Third, if you do run it, use it to get over the next conversion threshold and then turn it off.

11:30 Remember the stair-step effect I mentioned earlier? Products with 11 to 30 reviews convert more than twice as well as products with none. And once you get past a hundred, it jumps again. So, pay to cross the next threshold and then turn it off and let the free methods take over. The worst thing you can do is leave it running forever because that's exactly what Amazon is hoping that you're going to do.

11:52 And for the ads inside of Alexa, I'd be a lot more careful. Three out of four shoppers say they trust a brand less for paying to influence an AI. So, make sure you monitor your conversion rate. And finally, don't build your whole business on Amazon. Every new ad Amazon invents raises what it costs to stay visible there, and the sales you make on your own site do not come with a bid box. And now that you know where Amazon is heading, make sure you watch this video next on the app that is Amazon's biggest nightmare.