Amazon & Advertising

Lines are blurring between businesses that Large tech is operating in. Ecommerce platforms like Amazon reported $31 Billion in ad revenues which are roughly similar to Google Display, YouTube, or the entire global newspaper industry’s ad business.

Although this is only about 6.5% of Amazon’s net revenue, but compared to Google’s ad business which has close to 60% operating margins, Amazon’s should be in the range of $18bn of operating income in 2021. Which surprisingly is exactly the same as the $18bn that Amazon reports for AWS (Which has higher Capex requirements).

Apps & digital storefronts are now being used as inventory by almost everyone now. And, the deprecation of third-party cookies has “shifted digital ad budgets toward walled gardens with the data and media advertisers need for scalable targeted campaigns.

With almost 50% of product searches starting on Amazon it makes it extremely important for brands to defend their search position, much as they do on Google.

A number of brands that don’t sell on Amazon, or don’t even have e-commerce businesses want to target across the web using Amazon shopping data. To find people in-market for an automobile, say — even though it doesn’t sell cars — Amazon has black box audience segments based on purchase data for products that often precede buying a car.

Lastly, Amazon has been known for its “clunky” ad platform. But the company is making progress to catch up with the likes of Google and Facebook, whose platforms allow buyers to merge or overlay data and create infinite varieties of audience segments. Brands can bring their own sales data to Amazon’s marketing cloud, and do incremental testing to understand how Amazon ads impact overall retail sales.

It’s using an axe instead of a scalpel; But sometimes that’s the right tool.

Amazon is refining its targeting and measurement with a cloud-based data clean room in beta.