6 ways Amazon will eat media and marketing - Digiday
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6
ways Amazon
will eat media
and marketing
Amazon seems to have everything going for it: Endless
scale, bottomless coffers and a customer-centric point of
view that can provide the kind of data marketers and media
have only been dreaming about for the last few years. If
Amazon can improve some of its advertising back-end
and focus on growing its non-commerce business, 2018
will certainly be the year of Jeff Bezos.
02 Amazon is everywhere
04 How Amazon could become an
entertainment powerhouse
06 How Amazon will eat
advertising 08 Why Amazon is set to change
advertising as we know it
10 Pitch Deck: How Amazon is
pitching ad buyers 20 Inside Amazon’s pitch to agencies
23 Amazon gets deeper into
programmatic 25 Too big to ignore
01
Amazon Is Everywhere
Amazon’s living up to its name.
The company has sprawled seemingly
into every corner of every industry.
Here’s where Amazon has its fingers.
By Shareen Pathak
02
Marketplace in 2009. Amazon Fashion is a growing It lets it extend its Prime membership
This is the big one Amazon is set to presence — its big challenge is convincing offering, showcase its devices like Kindle
account for over half of all of the coun- high-end brands that it won’t dilute them and Echo, and reach a new legion of
try’s e-commerce by 2012. Bolstered by — and it has a real opportunity in becom- customers.
Prime members, Amazon is a wholesale ing a showroom for upcoming designers.
seller of some of the world’s biggest
brands — and for others, acts as a third- Amazon Studios
party marketplace. Essentially, it acts as Advertising Amazon is pushing deep into video. In
both a buyer and a seller, and because of Amazon is turning into an advertising order to shore up Prime subscriptions
sheer scale, it can control pricing, creat- powerhouse. The company has a pro- (which are the company’s third-largest
ing a virtuous cycle that keeps customers grammatic ad product that will generate source of revenue), Amazon is creating
happy and keeps brands on its platform. it $1 billion this year — and potentially premium streaming content that custom-
break the Google-Facebook duopoly. ers will want to pay for. Content Amazon’s
Through Amazon Marketing Services and Echo home device plays a big part not
Amazon brand Amazon Media Group, Amazon is now only for its retail business, but also its
To cause more consternation, Amazon selling an ad product that brands have a media. Echo lets it deepen its media
is also able to compete with the brands lot of interest in. Amazon Web Services relationships, opening it up to companies
that sell to it either wholesale or through Amazon’s second biggest source of reve- like the BBC (and Digiday) to reach new
its third-party system. The brand now nue made about $12.2 billion in sales last audiences.
sells AmazonBasics for essential items year. While more under the radar than
and has private labels in consumer its other businesses, AWS is a behemoth,
packaged goods and apparel as well. It letting Amazon sell more than actual The Bank of Amazon
makes sense: It barely has to spend on products — and sell storage space. It’s Amazon’s foray into brick-and-mortar
marketing, and the data it keeps close to also been a big reason why the company has been extended with July’s launch of
its chest enables it to know what is selling is able to attract tech talent. Amazon Pay, which lets customers pay for
well. Then, it tries to undercut brands by items in a store like they’re on Amazon.
making its own products. com. This extends Amazon’s reach into
The Amazon Store the world of finance, where banks still
From the test bed of Amazon Go — the control a lot because customers can use
Luxury and fashion retail store with no human employees — to debit or credit cards to buy things. It’s a
While Amazon may have the market Amazon Books, Amazon is pushing hard natural stepping stone to a future “bank
cornered on basic retail, it also has its into bringing its online brand into the of Amazon,” which can do lending and
sights set on luxury. It has made a series physical world. Coupled with its moves manage money. For a company that is
of investments, from buying e-commerce in grocery with the acquisition of Whole more trusted by people than most banks
site Shopbop in 2006 to acquiring Zappos Foods and AmazonFresh, being in the are, it’s probably a good fit.
real world is a huge asset for Amazon.
03
How Amazon could
become an entertainment
powerhouse
By Lucia Moses
The list of industries trembling lets viewers subscribe to streaming shipping benefits gives people more
at the thought of Amazon turning its services including HBO Go, Showtime incentive to join and renew their sub-
sights on them is not short. One juicy and Starz as well as smaller chan- scription and watch more Amazon
target: Hollywood. nels. It’s gotten a foothold in sports video.
Amazon already has a foothold programming, having made a deal “The end game is to cement the
in entertainment. After all, Amazon in April with the NFL to stream 10 subscription-bundled relationship
Prime Video already reaches roughly Thursday night games and outbid with the consumer so that you
18 percent of U.S. households. Sky for the U.K. rights to broadcast never leave the bundle,” says Rich
Amazon chief Jeff Bezos is poised to ATP tour tennis matches. Greenfield, media and tech analyst at
spend $4.5 billion on video content in Its Alexa-powered device, Echo, BTIG. “I believe they think they’ll win
2017, nearly double what it spent the already dominates the voice-acti- by controlling your time. Consumers
year before. Amazon, like Netflix, is vated home assistant market. spend four to five hours a day watch-
poised to eat Hollywood. Oh, and it’s also getting into ing television. So there’s a huge pot
Central to its entertainment social media, launching Spark, an of fish to catch.”
empire is Amazon Studios, the arm Instagram-like network for shopping; Amazon clearly wants more. It still
that puts out original TV shows like and working on Anytime, a messag- lags behind Netflix in a few ways. It’s
“Transparent,” “The Man in the High ing app. one of the four major OTT apps, but
Castle” and “The Grand Tour” — con- is third in household penetration and
tent that’s available for free to the 80 Prime time fourth in terms of monthly viewing
million people who pay for a $99-a- Amazon’s biggest trump card in its hours per month, behind Netflix,
year Amazon Prime membership. It’s entertainment ambitions is that they YouTube and Hulu, per comScore.
spent $12 million to buy movies (and help it sell toilet paper. Amazon is To keep people re-upping Prime,
credibility) at this year’s Sundance; bulking up on all this entertainment it also needs to keep giving people
the year before, its “Manchester by because it’s critical to Amazon Prime, more attractive content. And Amazon
the Sea” was the first movie bought which is fueling much of Amazon’s hasn’t had a breakout hit on the level
by a streaming service to win an growth. Prime members spend of Netflix’s “Orange is the New Black”
Oscar, per Fortune. twice as much — $1,300 — a year on or “Stranger Things.”
Beyond the homegrown shows, Amazon than non-Prime members. With Amazon, the common
Amazon buys and distributes feature Prime also gives Amazon data on its refrain is, “Amazon can do anything
films and videos from publishers shoppers, which it can use to target it wants.” And media and entertain-
including Condé Nast and Playboy more products and ads to them. So ment are no different. Observers
and HowStuffWorks. Amazon also adding entertainment to Prime’s free see Amazon going after more and
04
varied content. It’s expensive to keep Intelligence Research Partners. Less to watch Google’s YouTube.
relying on third parties for content, likely, but not out of the question, he “It speaks to how Amazon has
so Amazon will continue to create its says, Amazon could leverage Bezos’ packaged these things together as
own, says Darren Herman, operating ownership of The Washington Post to part of the Prime membership to
partner at Bain Capital. start a cable news network, which it create these synergies,” says Mike
could then promote and distribute. Rich, vp of emerging products at
Buy or build Making video part of Prime’s ben- comScore. “Clearly, Amazon is differ-
However, as its acquisition of efits makes Amazon’s entertainment entiating in making video a broader
Whole Foods shows, Amazon isn’t model different from other streaming suite of products and services, so
averse to buying established com- services, which are just competing there’s a stickiness they’re going for.”
panies after starting out building for people’s entertainment budget. Video helps Amazon in other
its own, as it did with food retail. This Prime model also seems to be ways. According to CIRP, Prime mem-
In entertainment, that could mean bringing new customers to streaming bers who watch free video are more
buying a movie studio. video. Netflix dominates stream- likely to buy and rent video from
It could bid for more sports rights. ing video, but fully 26 percent of Amazon.
Observers see it bundling streaming Prime video watchers aren’t already What does this all bode for
channels a la skinny cable bun- subscribing to Netflix, according to publishers and content creators?
dles, positioning it to take video ad comScore research. Amazon’s moves into entertainment
share from Google and Facebook, Amazon’s packaging genius mean more competition for people’s
says Bernard Gershon, president of also extends to its Fire TV device, time and attention that are now
GershonMedia, which consults to which makes TVs into connected going to newer streaming services
publishers. devices. According to comScore, such as Netflix and Hulu as well as
“One could imagine them buying Fire TV owners are twice as likely legacy cable and broadcast compa-
ESPN, CNN, and that becomes just to watch Amazon video on their nies. There’s an opportunity for video
like another channel on your Amazon Fire-connected TVs — far more companies to get more distribution
account,” says Josh Lovitz, part- than people who have Google for their content; the question, Lovitz
ner and co-founder of Consumer Chromecast-connected TVs are likely asks, is will Amazon’s terms be better
or worse than what the legacy dis-
tributors would have paid?
“They are not traditional, which
makes them dangerous to the tra-
ditional ecosystem,” Gershon says.
“They are incented to grow Prime
members, and Prime members buy
more stuff. So their hands are not tied
as a traditional bundler of content.” D
05
How Amazon
will eat
advertising
John Wanamaker, meet Jeff Bezos.
He knows which ads were a waste.
By Shareen Pathak
When it comes to threats to adver- “Our perspective isn’t if Amazon will consumer packaged goods industries,
tising, WPP chief Martin Sorrell is a keen go all-in on advertising. It’s that they are are paying even closer attention to
student. He quickly identified Google as going all-in on advertising,” Tombras Amazon after its purchase of Whole
a frenemy during its rise. And now, it’s says. Foods, its latest foray into brick-and-mor-
Amazon that’s keeping him up at night. tar retail.
The reason: Amazon boasts a gigantic Proving ads work “What Amazon is really introducing
pool of data, not just likes and habits, brands to is performance marketing,”
If there’s one thing chief market-
but purchases. It could position its ad says Kevin VanValkenburgh, svp of
ing officers hate, it’s unscientific and
platform to be the arbiter of what ads connections planning at Tombras. “Take
unreliable attribution methods that
work in driving people to make purchases a brand like Tide, where a search ad on
require them to connect the dots from
— and the one best positioned to target Google is just brand building. On Amazon,
their marketing to actual conversions.
those ads. a search ad is brand building, but it’s also
Any platform that helps them go beyond
That’s the vision of the Amazon ad conversion and sales.”
theory to practice helps, which is just
platform, one that will be achieved if If Amazon goes all-in on advertising, it
what Amazon is pitching agencies: If you
Amazon goes all-in on advertising. It’s also means a new wave for social media.
buy ads on Amazon, you’ll know if they
already starting to happen. Amazon’s Spark, its new Instagram imitator that
work. Google and Facebook became the
ad business is already worth almost $2 lets customers view a feed of shoppable
duopoly because they delivered more
billion. (BMO Capital Markets places it photos posted by Prime members and
conversions, Tombras says, and Amazon
at $3.5 billion in revenue this year.) And then shop them through Amazon.com, is
goes much further.
Amazon executives have repeatedly said a big game-changer, says Brian Cohen,
“Imagine that you’re a brand running
the company is investing heavily in ad evp and senior group director at Catapult
an Amazon campaign. Then, you can
sales teams. The growth rate of jobs in Marketing. “You’re talking about a
see how many people click on your ad,
that area has exceeded the company website being able to monetize personal
maybe even buy your product online.
growth rate, CFO Brian Olsavsky has said. social data,” he says.
Then, inside the Amazon Media Group
The company also sees both sales tools What makes this plausible — and also
service arm, you can see data inside the
in self-service and managed accounts a bit scary — is how much data Amazon
stores on who was served an ad and who
growing. To Dooley Tombras, evp at The is sitting on that could make this a nearly
bought in store,” say Tombras.
Tombras Group, it’s just a matter of time. Agencies and brands, especially in the seamless undertaking, from image rec-
ognition technology to supply chain that
06
makes this close to a perfect e-commerce considering the fears brands have of programming interface access akin to
and advertising play. “They probably their programmatic ads showing up in Google’s big management platform.
know more about us than the govern- odd places: Amazon can ensure ads are Amazon’s paid search arm doesn’t have it
ment,” says Cohen. The individual player appearing only where they should. yet, but it’s in the works. That would posi-
in the marketplace usually knows pieces tion Amazon to take market share from
of a customer on a purchase level. Using Threatening the duopoly Google, while Amazon’s media group,
third-party data, you can supplement As an advertising behemoth, Amazon which lets marketers put ads in places
that. But Amazon is close to marrying all could break up the Google-Facebook outside Amazon such as the Kindle,
of that to create what those in the indus- duopoly — or at least add a third leg. And would directly rival Facebook.
try call a “total wallet” perspective. both could stand to lose. Amazon’s AMG Amazon also boasts a big content
Frank Kochenash, svp of commerce and AMS services both provide essen- play. Let’s say it knows, for example, what
at Possible, says Amazon is lacking tially what those two platform giants brand of running shoes you buy. If that
scale and more outreach to agencies to do, albeit in a slightly more ramshackle running shoe manufacturer comes out
show them why it should be the choice. and rudimentary fashion. (Observers say with a new pair that matches your stride,
“Amazon looks at advertisers as custom- Amazon’s current offerings put it where the manufacturer could announce that
ers like they look at their actual cus- Google was about eight years ago.) news on Amazon, not Runner’s World.
tomers,” says Kochenash. “To Amazon, The key, say those who work with The implications for publishers is poten-
the end consumer will also be the main Amazon’s ad products, is to merge AMG
person to sell to. That is why maybe tially enormous. “Nobody is going to call
and AMS. The company is also building
there is some caution in developing ad up a publisher to advertise there,” says
a self-service platform that will let it
programs. But that’s good for advertisers Cohen. “They’re going to buy audiences.”
scale, and according to people familiar
in the long run.” That’s especially true with the matter, opening up application
D
07
Why
Amazon
is set to
change
adver-
tising as
we know
By Shareen Pathak
it
08
When it comes to threats to advertis- can see how many people click on your show them why it should be the choice.
ing, Martin Sorrell is a keen student. He ad, maybe even buy your product online. “Amazon looks at advertisers as custom-
quickly identified Google as a frenemy Then inside the Amazon Media Group ers like they look at their actual cus-
during its rise. And now, it’s Amazon service arm, you can see data inside the tomers,” says Kochenash. “To Amazon,
that’s keeping him up at night. stores on who was served an ad and who the end consumer will also be the main
bought in-store,” said Tombras. Agencies person to sell to. That is why maybe
The reason: Amazon boasts a gigan- and brands, especially in the consum- there is some caution in developing ad
tic pool of data, not just likes and habits, er-packaged goods industries, are paying programs. But that’s good for advertisers
but actual purchases. It could position its even closer attention to Amazon after its in the long run.” That’s especially true
ad platform to be the arbiter of what ads purchase of Whole Foods, its latest foray considering the current fears brands have
work in actually driving people to make into brick-and-mortar retail. of their programmatic ads showing up in
purchases — and the one best positioned odd places: Amazon can ensure ads are
to target those ads. “What Amazon is really introducing appearing only where they should.
brands to is performance marketing,”
That’s the vision of the Amazon ad says Kevin VanValkenburgh, svp of Threatening the duopoly
platform, and one that will be achieved connections planning at Tombras, “Take As an advertising behemoth, Amazon
if Amazon goes all-in on advertising. It’s a brand like Tide, where a search ad on could break up the Google-Facebook
already starting to happen. Amazon’s Google is just brand building. On Amazon, duopoly — or at least add a third leg. And
ad business is already worth almost $2 a search ad is brand building, but it’s also both could stand to lose. Amazon’s AMG
billion. (BMO Capital Markets places it conversion and sales.” and AMS services both provide essen-
at $3.5 billion in revenue this year.) And tially what those two platform giants
Amazon executives have repeatedly said If Amazon goes all in on advertising, it do, albeit in a slightly more ramshackle
the company is investing heavily in ad also means a new wave for social media. and rudimentary fashion. (Observers say
sales teams. The growth rate of jobs in Spark, its new Instagram-imitator that Amazon’s current offerings put it where
that area has exceeded the company lets customers view a feed of shoppable Google was about eight years ago.)
growth rate, CFO Brian Olsavsky has said. photos posted by Prime Members and
And it just announced that it would open then shop them through Amazon.com, is The key, say those who work with
a New York office with 2,000 jobs focused a big game-changer, says Brian Cohen, Amazon’s ad products, is to merge AMG
mostly on advertising. The company also evp and senior group director at Catapult and AMS. The company is also building a
sees both sales tools in self-service and Marketing. “You’re talking about a self-service platform that will let it scale,
managed accounts growing. To Dooley website being able to monetize personal and according to people familiar with
Tombras, vp at Tombras Group, it’s just a social data,” he says. the matter, opening up API access akin
matter of time. “Our perspective isn’t if to Google’s big management platform.
Amazon will go all-in on advertising. It’s What makes this plausible — and Amazon’s paid search arm doesn’t have it
that they are going all-in on advertising,” also a bit scary — is how much data yet, but it’s in the works. That would posi-
Tombras says. Amazon is sitting on that could make tion Amazon to take market share from
this a near-seamless undertaking, from Google, while Amazon’s media group,
Proving ads work image recognition technology to supply which lets marketers put ads in places
If there’s one thing chief marketing offi- chain that makes this close to a perfect outside Amazon, such as the Kindle,
cers hate, it’s unscientific and unreliable e-commerce and advertising play. “They would directly rival Facebook.
attribution methods that require them probably know more about us than the
to connect the dots from their marketing government,” says Cohen. The individual Amazon also boasts a big content
to actual conversions. Any platform that player in the marketplace usually knows play. Let’s say it knows, for example, what
helps them go beyond theory to practice pieces of a customer on a purchase level. brand of running shoes you buy. If that
helps, which is just what Amazon is pitch- Using third-party data, you can supple- running shoe manufacturer comes out
ing agencies: If you buy ads on Amazon, ment that. But Amazon is close to marry- with a new pair that matches your stride,
you’ll know if they work. Google and ing all of that to create what those in the the manufacturer could announce that
Facebook become the duopoly because industry call a “total wallet” perspective. news on Amazon, not Runner’s World.
they delivered more conversions, The implications for publishers is poten-
Tombras said, and Amazon goes much Frank Kochenash, svp of commerce tially enormous. “Nobody is going to call
further. “Imagine that you’re a brand at Possible, says that Amazon is lacking up a publisher to advertise there,” says
running an Amazon campaign. Then you scale and more outreach to agencies to Cohen. “They’re going to buy audiences.”
09Pitch Deck
How Amazon is pitching ad buyers
By Shareen Pathak
10agenc
advertising
platform
Facebook
Google
Amazon is ramping up its advertising on Amazon but also elsewhere. It’s a
pitch to agencies and brands. The clear shot at other platforms like Google
company recently expanded its self-serve and Facebook — the wealth of the data
programmatic advertising offering so Amazon has on its customers is beyond
agencies can now buy ads on their own what those behemoths have. Essentially,
through Amazon Media Group. It also Google has search data and Facebook
extended some of the AMG offerings to knows interest levels, but Amazon has
third-party sellers on the platform, going real power because it knows what people
as far as to offer them discounts and are buying and how they’re doing it.
incentives to advertise on the platform. “They are taking steps to make the ad
program scalable,” said one executive.
The e-commerce giant has, according
to agency executives, also been growing It’s an approach that emphasizes
its sales team. Chief financial officer targeting at scale, across behavioral,
Brian Olsavsky confirmed this during contextual, lookalike, remarketing and
the company’s most recent quarterly demographic and geographic targeting.
e-commerce
earnings call, saying the growth rate
for the ad sales team is faster than the Amazon has 300 million users on
head-count growth at Amazon’s other Amazon.com and data on each user, from
myriad business units, which averages where they live to what they browse and
42 percent annually. “What we’re seeing buy. Amazon is able to create complete
is an accelerated growth rate in software pictures of customer data potentially
engineers and also sales teams to better than any other platform. And
support primarily [Amazon Web Services] it’s all data it keeps close to its chest,
and advertising. So, yes, the growth retailers say.
rate of those two job categories actually
exceeded the company growth rate,” he In June, Amazon also launched a
said on the call. self-serve platform called Advertiser
Audiences, which lets brands upload
Amazon’s pitch to agencies focuses CRM lists to let them audience match.
on Amazon’s own power as a shopping The deck plays that up in a section on
behemoth, according to a pitch deck lookalike and remarketing targeting,
obtained by Digiday. Its pitch emphasizes telling brands that Advertiser Audience
that its data reflects how people research, segments can reach all types of new,
consider and purchase things, not only existing and lookalike customers.
111
2
123
4
135
7
146
8
159
11
1610
12
1713
14
1815
16
19pitch to agencies
Inside Amazon’s
By Seb Joseph
Unlike Facebook and Google, the
e-commerce giant is in the business of selling
products to shoppers, not selling inventory to
brands — a subtle, yet important difference.
Advertising executives are talking to Amazon’s
As Amazon’s advertising business gathers reps about supply chains and inventory as
much as ad copy or keyword strategies, which
momentum, agencies are realizing what Jason Hartley, 360i’s national head of search
and paid social, admitted “is very different and
it takes to run campaigns on the world’s challenging, but absolutely necessary.”
largest online retailer.
As Amazon reps clarify that difference
to agencies, there’s a growing sense among
executives that the e-commerce giant
isn’t going to change the way it works to
accommodate advertisers. Instead, it asks
agencies to change their approach to creating
online campaigns. “Traditional media owners
are focused on maximizing the impact of their
media and boosting the yield for themselves,
whereas Amazon is focused on creating
experiences that benefit the customer,” said
one executive, speaking on condition of
anonymity.
20Amazon’s reluctance to compromise “brand-marketing vehicles,” according Amazon, agencies believe their clients
its shopping experience can make it to executives working with the business. will continue to use it to complement,
trickier to buy media at times, the exec- Generally, marketers are more interested rather than replace Google’s own ads.
utive said. That’s not to say agencies are in how Amazon can drive lower-fun- However, Hartley said, if brands try to
struggling with Amazon’s ads. In fact, the nel conversions, and consequently, its find new customers on Google using
business is more open than Google and search ads. Nick Buckley, L’Oréal’s digital more generic non-brand terms and don’t
Facebook in some respects to creative director in the U.K., recently told Digiday get strong results, more budgets could
ideas for campaigns, agency sources he would move more of the brand’s shift to Amazon. “As it becomes easier to
said. The executive explained: “If you search budget over to the retailer, given integrate data into multi-touch attribu-
work with Amazon in the right way, then its emergence as the preferred entry for tion, we might see more fluidity between
there are opportunities to create custom internet shopping. More than a quarter the platforms,” he said.
campaigns for brands, which might (29 percent) of consumers say they start
not necessarily be so easy to pull off on product searches on Amazon, versus 15 For 360i’s campaigns, ROI on
Google or Facebook.” percent who say they start on search Amazon’s search ads, particularly spon-
engines, according to a UPS survey con- sored products, is strong relative to tradi-
Previously, brands needed a distribu- ducted in the first quarter of 2017. Brands tional search programs for many brands.
tion presence on the platform to capital- may want the lower-funnel conversions Yet the ROI with Amazon can also be less
ize on Amazon’s ads. However, with the from Amazon, but agencies have noticed straightforward, Hartley said, as ads can
online seller’s expansion of placement the retailer has its eye on budgets further drive direct sales, but those sales can also
and targeting options, more brands, up the purchase funnel. lead to more visibility in organic searches
including those that do not sell through on Amazon. Consequently, there is a
Amazon, are using the company’s adver- Recent improvements to Amazon’s “halo effect that is real,” but it is difficult
tising business, said Scott Abbott, head of content options for its brand storefronts to measure or identify, he said.
pay-per-click marketing at iProspect. are a step toward “improving the experi-
ence on the site in ways that brands will Another challenge for agencies is
Part of that flexibility is due to the size appreciate,” said Hartley. Amazon is also calculating the commission Amazon
of Amazon’s ad business compared to building a paid search tool to monetize takes for any sales generated from search
that of Google and Facebook; eMarketer the reams of product searches it hosts. ads, which varies from product category
estimates Amazon made $1 billion (£777 to product category, said John Barham,
million) on ads in 2016, significantly “To a large degree, Amazon is still head of paid media at Roast.
less than the $79 billion (£61 billion) seen as a performance buy,” Abbott said.
and $27 billion (£21 billion) Google and But he added that he expects the launch As Amazon grows its sales team and
Facebook generated respectively over the of Amazon Spark in the U.S., the Amazon agencies build out their own expertise on
same period. Being a smaller ad player Influencer Program and the new Amazon the platform, the online retailer’s place
means Amazon’s reps are more hands-on Store “brand pages” will prompt more in a fragmented supply chain is set to
with individual agencies, encourag- brands to use Amazon for brand build- become clearer sooner rather than later.
ing them to view product pages like ing. Until more brand budgets flow into
21Amazon
gets deeper into
programmatic
By Shareen Pathak
Amazon is growing its ad business, first-party and third-party users. use everything from product images from
most recently making two big moves that Amazon.com to product review informa-
will bring it more revenue. The second executive also said the tion that can be used for creative.
company has made widely available an
Agency execs say Amazon is opening application programming interface for In June, Amazon also launched
up and evolving self-service for Amazon sponsored product ads, increasing the Advertiser Audiences, a self-serve
Media Group, its advertising arm that efficiency of bids on the platform, and platform that lets brands access audi-
works similarly to programmatic adver- that similar developments are expected ence matching, similar in a few ways to
tising to serve ads to people off Amazon. for the AMS platform in the near future. Facebook and Google. The tool allows
com. “What they’re doing now is opening brands to build audience segments based
as a self-service platform to agencies, An Amazon spokeswoman said that on data from Amazon. The growth of
letting us manage those campaigns,” said advertising is still a newer part of the self-serve is a clear move to give more
one exec, where previously agencies had business, but the goal for the company levers and control to marketers and their
to go through Amazon’s own manager is to constantly evolve and update tools agencies. Self-serve means more ads,
services. available for advertisers — and the ulti- and more ads means more revenue. It’s
mate goal is to make all tools available in attractive to agencies because it lets
The executive said Amazon first self-service. agencies impose their own margins or
approached him about the tool in the markups. That inevitably reduces friction
third quarter of last year, saying it was in Amazon’s public page describing its and also means more ad options and,
beta. The company told this executive in programmatic ad platform says the plat- therefore, more revenue. “I have heard
July that the tool was now open to more form will dynamically deliver ads across from reps that this is a major part of their
brands and agencies, and it was a work Amazon.com and IMDb, as well as other effort to boost advertising,” said one
in progress with some branding changes owned and operated sites and apps, on agency executive with knowledge of the
coming to it. Another agency executive publishers’ sites and through exchanges. matter.
said Amazon has made major advance- The offering, called Amazon Advertising
ments this year that make it easier to Platform, or AAP, is the company’s pro- The second change Amazon
bid on the platform and report for both prietary demand-side platform and can made that caused ripples in the seller
22community was opening up headline Travel Luggage, who sells as a third-party strategic brands to steal share from those
search ads to sellers as long as they are seller on the platform, said she doesn’t still struggling with the platform,” said
brand owners. Headline search ads are remember getting credits, but does see one executive. Amazon has a growing ad
largely the most powerful Amazon adver- headline search ads (part of AMS) adver- business, although its size is still up for
tising tool — second only to sponsored tised to her occasionally. “This lets me debate. WPP chief Martin Sorrell, who
product ads. They appear above the dominate keywords,” she said. “I know I has been one of the loudest voices in the
search results when customers search spend the same amount within Amazon industry on Amazon, estimated last week
for a particular item, similar to Google and get more targeted return than any- that the company made $2.5 billion from
Search. where else.” digital advertising in 2016, while eMar-
keter put Amazon’s 2016 ad revenue at
“This high-performing slot can be a Until now, third-party sellers, who sell
$1 billion. Morgan Stanley analyst Brian
huge difference for brands working to in Amazon’s marketplace, not to Amazon
Nowak estimates that Amazon’s advertis-
announce and launch new products or directly, had a number of hacks for
ing business will reach $7 billion in reve-
defend critical or strategic brand terms,” accessing AMS. Those in the seller com-
nue by 2020. Brands are also increasingly
said one executive. (The third ad type munity had a low-performing product
using Amazon’s ad platform, especially as
available is product display ads, formerly — essentially a sacrificial lamb — sold via
the company ramps up its pitch to them.
known as e-commerce ads, which are Vendor Central, which would give them a
only open to those who are vendors, that door into AMS. (AMS options like product
Analysts in the industry believe rapid
is, sell directly to Amazon) display ads are only available to vendors.)
growth on the ad side is probably a
Some sellers who spoke to Digiday “While [Amazon is] still years behind priority for Amazon, since that can help
under the condition of anonymity said monetizing the platform as Google has, ease its other growth issues, especially in
they are getting $99 coupons and incen- the new changes, such as opening up new its lucrative Amazon Web Services arm.
tives to spend on Amazon Marketing ad slots, allowing for automated cam- And advertising has a profit margin of
Services, a common tactic for platforms paign reporting, complex keyword attri- 20-30 percent versus the 5 percent that is
as they grow ad options. Kristin Rae, bution and use have greatly increased common for retail, according to analyst
an entrepreneur and founder of Inspire efficiency of the channel and allowed Steven Mallas.
23Too BIG
to Ignore:
Could Amazon get broken up?
By Hilary Milnes
W hen Amazon decided to buy
Whole Foods for $13.7 billion, the retail
anti-antitrust today. It’s incredible how
large and how important these organiza-
industry responded with a resounding tions have become in their industries.”
gulp. Antitrust laws in the U.S. are relatively
The news inspired Amazon antag- helpless against Amazon, though. They’re
onists to speak up: The company has set up to target companies that are
gotten too big to fail, and it’s competing hurting consumers, not other businesses,
in too many industries. Now, as it thun- so it’s not in the nature of the Federal
ders into the grocery market, it’s time to Trade Commission or the Department of
do something. Justice to rule that companies must “play
The call to break up Amazon has nicer” in order to help other businesses
one vocal supporter: President Trump, stay afloat. Plus, Amazon competes on
who said in a May 2016 interview that pricing, and according to the FTC, it’s
Amazon chief Jeff Bezos (who also owns nearly impossible to prove that “too-low”
The Washington Post and against whom prices are unlawful, unless a company
Trump has a personal grudge) had a is specifically lowering prices to drive
“huge antitrust problem” and is sitting on out competitors, then raising them after
a monopoly that needs to be divested. competition is out of the way, something
Talking down big business in favor of Amazon hasn’t done.
small, locally owned companies has been “The idea is that Amazon simply
political lip service for a long time. And has its tentacles in too many different
while in the case of Amazon as a monop- businesses,” says Smith. “Amazon is
oly, no action is apparently imminent, it’s the e-commerce leader, retail dollars
not entirely out of the question that the are leaving brick-and-mortar, going
company could eventually split off one or online, et cetera. But where we could
more of its businesses. get closer to an actual breakup is if
“It’s certainly plausible — someday,” Amazon becomes a bigger player in
says Cooper Smith, head of Amazon these secondary businesses. Amazon is
research at digital intelligence firm L2. taking market cap away from traditional
“With the dominance of tech giants enterprise companies, and what happens
like Amazon and Google, we’re almost if Amazon becomes the leader in retail,
24MO
POLY
cloud computing, advertising, media and
shipping logistics?”
Those businesses include Amazon
“A breakup would set a precedent for
the retail industry,” says Smith. “Amazon
has set the standard for what customers
Amazon, it’s going to be a lengthy legal
process. According to Jason Goldberg,
the svp of content and commerce at
Web Services, its cloud computing want from a retailer, and if it were broken SapientRazorfish, current antitrust laws
business that has begun to take market up, more retailers would attempt that aren’t equipped for a company like
share from traditional leaders like Oracle model themselves. They have a difficult Amazon.
and Microsoft, and advertising, which time keeping up today because Amazon “Congress would basically have to
Smith calls Amazon’s “dark horse.” can absorb its profits and reinvest them pass a new law, and then we’d have to
According to a recent L2 Amazon report, in the organization like no other retailer change how those laws get interpreted,”
advertising is Amazon’s fastest growing can.”
says Goldberg. “We have conserva-
line of business, worth $2 billion, while While Amazon may be a boon for
tive antitrust laws that are centered
a 2016 BloomReach survey found that time-strapped customers now, it’s argu-
around protecting consumers against,
55 percent of online shopping searches able that Amazon’s unbridled dominance
say, inflated prices. Our antitrust laws
start on Amazon. Shipping and logistics, is stifling competition and innovation,
which could make for a less robust are basically outdated because in the
which Amazon sees as complementary
market and limit options for consumers digital world, Amazon can sell stuff at
to its retail business, could become a
in the long term. But diminishing Amazon a loss almost forever to help grow their
considerable business arm as well, as the
company spends more to reduce costs of wouldn’t be a magical cure-all for retail. business.”
delivery and fulfillment. Amazon Video, “Amazon being broken up in any way Blank points out that the most recent
meanwhile, is now the third-largest will not save retail from itself,” says Jared company to face antitrust scrutiny was
online streaming service after Netflix and Blank, svp of data analysis and insights at Microsoft in the 1990s, when it was worth
YouTube. analytics firm Bluecore. “Amazon’s invest- $900 billion by today’s dollar. Amazon,
If the FTC or DOJ were to rule that ments have been in customer service,
while seemingly too big to fail already, is
one or more of those businesses had data and quick delivery. Undercutting
worth $497 billion.
to be divested by Amazon, it’s possible that wouldn’t send people back to the
malls. It wouldn’t be helpful to Amazon, “The conversation that has come up
Amazon’s biggest competitive strength —
and it wouldn’t really help retail. so far is around the Whole Foods pur-
its ability to take continuous profit losses
while still growing the top line — would Marketplace sellers are also often over- chase and the president’s grudge,” says
be weakened, meaning it may not be able looked, but they benefit a ton by having Blank. “I don’t buy it. Amazon making
to deliver on its promises, like fast, free Amazon as a distribution channel.” people uncomfortable isn’t a valid reason
shipping. If any action is taken against to break it up.” D
MARKETING | DIGIDAY 26 25Amazon seems to have everything going for it: Endless
scale, bottomless coffers and a customer-centric point
of view that can provide the kind of data marketers and
media have only been dreaming about for the last few
years. If Amazon can improve some of its advertising
back-end and focus on growing its non-commerce
business, 2018 will certainly be the year of Jeff Bezos.
Shareen Pathak
MARKETING | DIGIDAY 27 26You can also read
