Inside Amazon’s plan to dominate advertising business in 2019

Inside Amazon’s plan to dominate advertising business in 2019

Amazon’s unrelenting efficiency, obsession with automation, and brutal pricing strategies have helped it disrupt or dominate industry after industry, which began with books way back in 1997. Over the next year, it’s bringing those tactics to bear on the organization’s latest target: the advertising industry.

To thrust its way into a sector that is overwhelmingly controlled by Google and Facebook, Amazon is making brazen new moves into self-serve programmatic advertising. They are planning to spend the next year aggressively expanding their infrastructure that is hoping will get more brands to purchase ad space on its websites (such as IMDb) as well as through its ad platform. To accomplish these goals, it will work with ad-tech companies, digital agencies, and media companies to build platforms that make buying Amazon ads as easy as filling up an online shopping cart.   

The industry is preparing for the change. Google’s DoubleClick supports buying search ads on Yahoo and Microsoft Bing and it’s building out the same capabilities for Amazon to launch later this year.    

Despite Amazon’s lofty ambitions, Facebook and Google have a strong lead and are well ahead of Amazon’s entry in to the programmatic marketplace, though it will not be without impact. The advertising digital duopoly’s share of US digital ad revenue will possibly tick down to 55.8 percent by 2020 from 56.8 percent this year, according to eMarketer’s data; Amazon’s share will increase to 4.5 percent from 2.7 percent this year.

Google and Facebook have never faced an invasion like this before. Amazon, the fifth-largest digital ad player on eMarketer’s list, is likely to capture 2.7 percent of the US market this year. But by 2020, the firm expects Amazon to jump to third place, surpassing Verizon Communication Inc.’s Oath and Microsoft Corp., with $6.4 billion in digital ad sales in the US.

Amazon is already appearing to beat expectation; eMarketer is forecasting that it will generate $3.7 billion in global ad revenue this year, but Amazon earning report from April 26, suggested that its ad business totaled more than $2.03 billion in sales in the 1st quarter alone. Amazon reports its ad sales inside what it refers to as “other” revenue, but they are the “majority” of that segment, according to the company.

Advertising agencies are now taking notice of Amazon’s ad platform and the data it provides compared to Google, according to Forrester. Amazon is “richer than any other player out there in terms of purchase and behavioral data.”

Amazon is more ingrained or plugged into what consumers buy than any other platform. There advantage lies in the fact that, it doesn’t need to close the loop from ad sale by reading uncertain attribution data about when a person saw an online ad and when that led to an actual purchase. Amazon is the full loop.      

Testing new retargeting ad tools

The ecommerce giant is developing a “retargeting” ad type that will recommend products based on consumers’ purchase or search histories, Bloomberg reports. Such ads will appear on several different sites visited by consumers, effectively retargeting and following them around and linking them back to Amazon if they click.

Retargeting (also called remarketing) is popular with apparel brands in particular, and Amazon’s movement into this area could prove attractive to apparel marketers as their numbers continue to swell on the ecommerce platform.

Amazon looks to tighten the following processes:

  • Product search: If the ecommerce titan can more consistently preempt the search process that originate with search engines, rather than amazon’s website with widely offered, targeted ads, it could establish a stronger presence at all points in the online shopping process by becoming the go-to starting point for even more customers, as well as the ending point.
  • Price comparison: Ads that follow the customer around could also give Amazon an edge while the customer is hunting for the best deal. The ad will remain on the screen while the customer searches for alternatives, and thus get reconsideration before purchase.

Amazon agencies    

Over the past, there has been a huge rush to develop Amazon ad services by the large advertising agencies, such 360i, Resolution Media, Iprospect, VML, and WPP.  If you visit any big digital agency and you are bound to encounter a specific team or unit that promising to guide brands through Amazon’s ever expanding ad offerings.  

Amazon will also start running premium services for Fortune 500 brands and vendors, that sell hundreds of millions of dollars in products through the ecommerce platform. They are expanding their advertising teams. Last September, 2017 Amazon announced it is moving its ad operations headquarters to New York City’s Hudson Yards in 2018. They will hire and create 2,000 new jobs over the next three years.

Open arms   

Amazon also has plans to grow its advertising base by opening access to the Amazon Ad Platform that connects to display and video inventory outside of its own. They will be opening up the ad platform to everyone that has a product on Amazon. It’s not going to matter if you are selling it to Amazon or selling it through Amazon, which will most likely increase the amount of ads you going to see.

Amazon is taking steps to expand its pool of outside ad inventory, by undercutting Google on ad-tech fees as it recruits for Amazon Publisher Services, a division offering ad marketplace services that will compete directly with DoubleClick for Publishers.

Currently Google offers similar ad-bidding technology for publishers, but it takes up to five percent from a deal, Amazon is planning not taking any percentage at the moment to people to buy in.

Amazon also dangles its own ad spending in front of publishers, making promises to spend its marketing dollars on their sites, with the caveat, that they must participate in its ad marketplace first.    

Conclusion

Amazon’s pitch to brands and agencies is that it is able to create a “total wallet” perspective — actually figure out what people are searching for with what they’re buying.

Amazon is in a privileged position because it sits at the intersection of media and retail, which excites the hell out of advertisers because it presents an opportunity where they have this “Third Estate” that has the ability to entirely collapse the funnel and deliver on total attribution.

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