Amazon and eBay Are Eating Your Google Ads Margin

The Cannibalisation Problem

A customer searches "organic protein powder" on Google. They see your Shopping ad (pointing to your site) and an Amazon listing (also your product, via FBA). If they click the Amazon listing instead:

• • You pay Amazon's 15% referral fee (lost margin)
• • You pay FBA fulfilment fees (higher than self-fulfilment)
• • Amazon owns the customer data (you can't remarket)
• • The customer builds Amazon loyalty, not brand loyalty
• • Your DTC Google Ads conversion rate drops (same clicks, fewer DTC sales)

The sale happened, but the profit is 20-35% lower than if they'd purchased from your site. And Smart Bidding on your DTC account sees fewer conversions, so it bids down - creating a doom loop.

Margin Erosion Mechanics

Compare the unit economics of the same product sold through each channel:

• • DTC via Google Shopping: Product price £30, COGS £12, CPC cost £2, shipping £3 = £13 margin (43%)
• • Amazon FBA: Product price £30, COGS £12, referral fee £4.50, FBA fee £3.50, shipping to FBA £1 = £9 margin (30%)
• • Margin gap: £4 per unit - multiplied by thousands of units per month, that's the cannibalisation tax

Search Overlap

The most damaging cannibalisation happens on branded search. When someone searches your brand name:

• • Your Google Shopping ad appears (you pay CPC)
• • Your Amazon listing appears in organic results (free click for Amazon, but you pay marketplace fees)
• • Amazon may also run sponsored ads using your brand name (you compete against yourself)

This customer already knows your brand - they were going to buy. The question is which channel captures them. Every branded click that goes to Amazon instead of DTC is pure margin destruction.

Data Ownership Gap

The hidden cost of marketplace sales goes beyond margin:

• • No email address: You can't build a direct relationship or email marketing flow
• • No remarketing: Amazon customers can't be added to your Google Ads audiences
• • No LTV visibility: You can't track repeat purchases across marketplace and DTC
• • No first-party data: Your first-party data strategy is blind to marketplace customers

Channel Strategy Framework

The answer isn't always to leave marketplaces. It's to be intentional about what each channel does:

• • DTC (via Google Shopping): Hero products, new launches, full-margin items, brand storytelling
• • Amazon: Clearance, long-tail products, market segments you can't reach via DTC, category discovery
• • Product differentiation: Offer DTC-exclusive bundles, colours, or sizes not available on marketplace
• • Price parity: If Amazon is cheaper than your DTC site, you're actively cannibalising yourself

Measuring Cannibalisation

Test the cannibalisation hypothesis:

• • Pause marketplace ads (not listings): Does DTC conversion volume increase proportionally?
• • Track total unit sales: Compare total business (all channels) before and after changes, not individual channel metrics
• • Monitor branded search overlap: Use Auction Insights to see if your marketplace listings appear alongside your Shopping ads
• • Calculate total channel P&L: Include all fees, fulfilment costs, and cannibalisation in the marketplace channel P&L

Next Steps