Why Simple Modern, an Amazon Native Brand, Ditched Amazon’s Advertising Platform (For Now)

Simple Modern, a maker of drinkware and homeware, was founded in 2015 by three friends who previously founded QuiBids, an online auction site.

“We’ve seen the rise and fall that can happen if you’re dependent on digital advertising,” said Bryan Porter, co-founder and chief e-commerce director of Simple Modern. “It worked great for us…until it didn’t.”

The experience of riding a wave of online advertising and then crashing on the beach has shaped Simple Modern’s marketing strategy, which is fully integrated.

Simple Modern doesn’t work with any third-party attribution providers, and most unorthodox of all, the company recently decided to shut down all paid media on Amazon because the ad platform wasn’t generating incremental sales.

Porter spoke with AdExchanger.

AdExchanger: How much do you rely on Amazon?

BRYAN PORTER: We launched an Amazon-focused channel strategy. We didn’t launch a product that we necessarily had great insight into; we were just very confident that we could sell well on Amazon. We ended up testing the products we sell today.

The website came a bit later, but we didn’t have much success on DTC until about two years ago.

Was it an investment decision or a response to a consumer pandemic?

We’ve always wanted a DTC presence, just for the control that comes with it – and the lack of reliance on things you can’t control, like whether Amazon wants to sell your products or not.

It was a long-term strategy game, but the pandemic has definitely been a catalyst for our website.

Why did you decide to freeze all Amazon ads?

We used to spend between 8% and 10% of our revenue on ads, but we started having success with organically ranked ads at a high level.

We’ve realized over time that if you have elite-level organic placement on Amazon, paying for a sponsored ad to appear a spot before your organic placement is only paying for organic traffic.

We have always been skeptical of attribution. Amazon and Google have an incentive to show you impressive performance numbers on your ad spend so you spend more. Ad spend isn’t always incremental.

How do you prove paid media isn’t incremental?

Where Amazon really makes ads seem to work well is with branded keywords. That was the first thing for us because we’re going to get those sales anyway.

One of the reasons it’s been difficult for us to make Amazon advertising work is that we operate on very low margins that are built around mass retail. There isn’t much room for advertising budgets, especially when we need to grow our inventory base by 50% or even double year over year for many years. We have just decided that it is better for us to invest in inventory rather than advertising.

We are a start-up company. Cash flow is really important to us – so obviously sales are not profitable. My goal is to find ways to gradually add paid media. But right now we have other priorities and ways to invest our capital that offer a higher return on investment than advertising.

How to generate additional sales without advertising?

The biggest way is to launch new products.

We’ve noticed on Amazon that a successful product launch can be completed in about two years. To keep growing, you need to keep launching new ads. We are also starting to invest in equipment to manufacture our own products in the United States.

Year-over-year inventory growth numbers won’t double in perpetuity. We’ll get to a point where our cash flow improves, and that’s when we can add fuel to the fire with advertising.

Do you advertise outside of Amazon?

We are more willing to drive profitable ad traffic to our website than to Amazon. DTC is our most strategic channel.

So, yes, we have Facebook and Google Shopping ads running.

Have Amazon’s advertising budgets disappeared or have they shifted to Google and Facebook?

We recently reallocated Amazon’s budget to these other areas of investment. However, we had independently decided to increase our advertising budgets on the website, so this was not directly related to the decision to stop Amazon ads.

Given the economic climate we find ourselves in, we also have excess inventory in our warehouse, so it has become more attractive for us to use an advertising budget lately.

Some people say you need paid media to have effective organic placement on Amazon, Google, and Facebook. Do you see an impact on organic listings when you stop advertising on Amazon?

We see an inverse relationship between paid and organic placements. It’s one of the things that made us want to stop paying for advertising.

For example, we do very well with the search term “water bottle” on Amazon. Every time we launched a Sponsored Products campaign, we noticed that our organic placement was going down. We saw no drop in organic rankings without any ad spend.

Our goal as a business has been to create listings on Amazon that can rank and convert other listings, and we’ve been able to do that. You don’t have to spend on ads to get the impressions you need.

But you must see a decline in overall sales, right?

Yes, there is definitely a drop every time we reduce ad spend. In terms of profitability, however, we don’t see ourselves as less profitable without the ad spend.

Where I think of the recovery in ad spend, a potential opportunity is when there’s a big delta between our organic rankings and the top paid placements to target their branded keywords. A good example is Starbucks, which sells very stylish cups similar to ours but at a much higher price. We are able to advertise on a keyword like “Starbucks Cups” and show enough value proposition to a customer searching for Starbucks to change their mind.

Another area concerns the keywords for which we are partially relevant. For example, we have the best-selling children’s backpack on Amazon. But there are many types of backpacks. We’re not totally relevant to “backpack” as a keyword, but we might be able to convert it, although we’re not going to rank organically at the top of this search.

We are considering taking over paid media on Amazon where it can be done in a cost effective manner.

Let’s take the “backpack” search example: how do you get ad-free impressions when you’re not getting a very organic ranking?

At certain times of the year – back to school, mainly – we are able to achieve higher organic rankings on a search term like that. Kids’ backpacks are much more relevant in August, and we’ll see more ranking success around this time. This fades once the school year is over.

The most effective lever we’ve found to boost organic placement has been offers, and I think the reason for that is that price drops increase your conversion rates much more than ads. With ads, you increase the number of eyeballs on your ad, but it might actually hurt your conversion rate. [a metric Amazon uses to rank organic listings].

We’ve found that deals really are the love language of Amazon’s algorithm.

How has the industry reacted to the removal of your Amazon ads? Positive? Landed?

I’m a bit annoyed by the kind of groupthink that happens around advertising. There is a famous quote from Jeff Bezos. He said that advertising is the price to pay for having a mundane product, and I think there is a lot of truth in that.

I know there’s a lot of competition on Amazon, but I’m an advocate for brands that change their ethos by focusing more on product than marketing.

This is not the reality for all sellers on Amazon. There is a place for advertising. And some people need to use it.

But we think of marketing as a way to invest capital – and there are plenty of ways to do that.

Do we choose to spend $200,000 donating to Amazon for ad impressions or to help create a new product line? And, if you can create a new product line, that’s an annuity you’ve created. Advertising expenses are a one-time affair. Maybe you’re acquiring customers, but, for the most part, you’re just disclosing value to advertising channels.

This interview has been edited and condensed.


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