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Amazon now has a billion-dollar ad business (digiday.com)
176 points by elorant 6 months ago | hide | past | web | favorite | 52 comments



One of the things I liked about Amazon early on is that they were on my side. They were very customer focused. For a while, though, they've been shifting to make me the product. Their site has become filled with sponsored products and ads. It's definitely reducing my trust in them.


As an Amazon customer since 1996, I'm ok with their "sponsored" placements on search pages. I'm not necessarily happy that pixels are taken up by sponsored spots but I'd rather Amazon show advertisers' influence transparently with the obvious "Sponsored" label.

This is unlike grocery stores where there are invisible "slotting fees". The particular items at the highly desirable "eye level" shelves are paid for. The colorful end caps[1] at the ends of aisle are there because the vendors paid extra for those spots. Same with the books at Barnes & Noble that are prominently placed "face out" instead of "spine out" or stacked on the featured tables[2] near the doors as you walk in. None of those retail manipulations have a sign saying "sponsored placement" on them.

If advertisers are going to influence the product display on the shelfs -- physical or virtual -- I prefer the way Bezos did it.

[1] https://www.google.com/search?q=aisle+end+caps&source=lnms&t...

[2] https://www.tckpublishing.com/how-do-bookstores-promote-book...


Some of those are paid for some of the time. As someone who has sold niche items to a number of different larger chains regionally, usually it is just the manager / dept manager who puts what they think will sell in the best spots. They have to perform like everyone else.


> I'd rather Amazon show advertisers' influence transparently with the obvious "Sponsored" label.

This is basically how Google works too, right? Do people distrust them for the same reason?


The distrust with Google runs much deeper than their labeling of sponsored content. Most of the distrust stems around how they're figuring out which sponsored content to show you, not that they're showing it to you in the first place.


Google forego decency, morals and in many cases laws, for money, long time ago.


YES. Other reasons too, such as the relentless spying, but that too.


Because they are in the business of spying on you and your close ones, which is immoral for every decent man.


I have a half-baked theory about advertising in customer-centric marketplaces (e.g. Amazon and App Store):

What if advertising is just like drug use? Most hate it and blame the suppliers, but there will always be demand for it. So, what if the marketplaces have a choice: Provide a "legal" way to advertise that is "safe" or outlaw advertising and push the behavior towards a "dangerous" black market.

Before App Store ads, app makers definitely used "black markets" to drive downloads... and now with the App Store ads I've heard rumors the app ecosystem is overall more safe.

What if it's the same for Amazon? By giving sellers a "legal" way to advertise, Amazon makes customers and the marketplace net safer.


If "black market" ads are more potent (more click throughs, buys, ect) then they will always exist, regardless if there's a "legal" way to do it.


I think the drug analogy still fits.

Like drugs, there will always be a "black market" but the "legalisation" lessens its strengths and effects.


Not black market ads. For example someone pays a group of people to review a product they are selling. Basically Amazon is competing with ‘black market’ techniques. A seller can now just pay Amazon to have their product at the top.


Trusting big companies is a folly anyway. They make decisions based on dollars and stats.

The only companies one can "trust" are the smaller ones - where the owner still has enough control to stamp his own sense of ethics onto the place.


Sure, but with their previous business model I didn't have to trust their ethics, just their long-term self interest. Amazon got big because they were good at serving their customers well. But if they've decided to make money from selling access to manipulating their customers, suddenly my trust in their sense of self-interest isn't enough.


I think you're missing a level of trust that it sounds like you implicitly had.

Selling you products you wanted at a good price never precluded them from doing shady with the data that resulted from those transactions. Their incentive is to maximize income, so they could've always done all sorts of shady behind-the-scenes things with the data as long as they felt the risk of getting exposed and losing a lot of business as a result was sufficiently low.


Depends on how exactly you define trust. You can always trust big companies - to do the thing that will make them the most money short term and/or minimize their risks. Their actions tend to be predictable. Small companies sometimes do strange / unpredictable / stupid things, you can't always trust that they'll do things that are in their best interest.


>Depends on how exactly you define trust.

Exactly as you'd understand it in this context. Trust in the human sense. e.g. I used to audit a small company had crazy loss making return rates but was still killing it overall.

Asked the financial manager about the returns losses - she's like that's what the owner of the company decreed. That's odd. Asked the owner wtf is up with these numbers. Turns out they basically refund for anything & everything. Owners stance was "either product delivers and the customer doesn't complain...or we give back the money". There was no middle ground in his world view.

That's what I meant by owner stamping his own ethics onto the company.

That said this guy had industry on his side. Anyone that needed his product had just by definition just spent big money on an associated asset. So 99% of his clients were serious and had money.

As a side note - they slaughtered the competition too. For customers that aren't price sensitive the combination of quality product and quality company stance wins.


Its less about wether you can trust such a company, more about powerless individuals feeling like there decisions matter.


How much to offer to and gain from their customers is a balance that every company has to strike. They choose the balance not out of the goodness of heart, but as a way to optimize their long term reward, given the regulation and competitive landscape. What we get from Amazon is about as much as what we can reasonably expect in the current environment. It will probably stay this way until new competition comes.


What I'm concerned about is a conflict of interest.

When they just sold things, they had a very clear way to gain from me: setting prices so that they were profitable. I'm told their margins have definitely crept up from the early days, but I'm fine with that.

But that's different than them selling me as a product to other people. I can pretty easily evaluate prices and shop somewhere else if I think Amazon's are too high. If, though, they are selling the ability to manipulate me, that's intentionally hard for me to notice and price.

Once they're selling the power to shape my behavior, suddenly they're not on my side anymore. I can't trust them as much, because for any given interaction, it's not clear whether they aim to serve me or aim to serve me to somebody else.


As long as their customer service blows everyone else’s out of the water, they will have me buying there. Replacements, refunds, returns, even icky stuff like ads suddenly turning on on my Kindle were all fixed within a 5 minute live chat, no wait. You have such customer focus practically nowhere else, unless you’re a someone who brings in major dough. It works so well that I happily pay the ‘Amazon premium’ (around 10%) to be sure of that certainty of service. I realize this sounds shilly, but it is how it is for me.


This is the boat I’m in too. My last PC build was sourced from Amazon at about a 10% premium over where PCPartPicker sent me, but i knew in advance that if I had any issues, it would be painless.

That and cheap, fast shipping.


The most disappointing part for me are the prices on amazon. They used to have the best prices. Now their products are overpriced. I noticed this starting in 2013 and bought a sizable stake in amzn ( the 60 minutes report on the amzn drone also helped ). So the appreciation of the amazon's stock price more than made up for their overpriced goods.


Is that just a general feeling, or are there specific issues you have with Amazon?

Ex: Maybe a particular page has too many ads/has ads at all/etc. Or maybe a particular service doesn't really do what you would like.

Disclosure: Work at Amazon, not on anything customer facing.


Honestly, I hate ads, and on a visceral level I dislike them on Amazon. HOWEVER... I haven't noticed them doing any harm to the experience, they're easy to identify, and therefore to avoid. I wish they weren't there, and worry about future conflicts of interest, but for the time being the behavior is acceptable.

If Amazon doesn't compromise the UX, including privacy, with ads, then I think most of us will live with it.


I find the technology industry to be a cluster of massive companies, with no real concept of consumer trust. Privacy is a thing of the past


> Privacy is a thing of the past

Apple swings decisively against this trend. Alignment of interests is a powerful social device.


Because they failed with it, everyone forgets iAd ( ads in the Apple way)


That might have been an attempt to corrupt their alignment of interests with their customers. It is not an example of a conflict of interest producing, well, conflicted outcomes. I'm skeptical even about the former claim given how locked down the iAd market was, which could be a product of said alignment forcing privacy-friendly parameters.


Charging advertisers more for less data was doomed to fail, no matter how elegant the implementation.

(In other words, I agree with you.)


i love being an amazon customer; less so an amazon merchant.

we sell DIY products, which can be damaged easily (improper electrical connections, poor RTFM, etc). the no-questions-asked return policy is not great for us.


Me too, but I still shop there and expect to shop there until I die.


Maybe they can reinvest some of that money and figure out how to not spam me for things I've already pre-ordered from Amazon.

Case in point, Super Mario Odyssey. Preordered from Amazon, and they've been sending me nonstop emails to try and sell me additional copies ever since.

At least their marketing emails tend to come from a different source from tracking notification emails so you can filter them with ease.


That doesn't sound like something that should be happening. Perhaps there is an error in the email targeting logic. I'd be happy to help get it looked into and see if it can be fixed.

If you'd like to take me up on my offer, please file a support case in the usual way to report this issue; then ping me at my work email address from the email address associated with your account to let me know you've done that. Ideally, explain what you did here in the support case, and provide the full email headers of the email that you expected not to receive (or at minimum, subject line and date). That's what will likely be needed to pinpoint the account and the problem. I'll keep an eye on it and do my best to ensure it's driven to resolution with the right people. We should expect follow-up and further communication to occur via the support case. I'll preemptively ask for patience since certain issues can take a bit to investigate.


Just unsubscribe from marketing emails. I receive zero marketing emails from Amazon, and I'm a prime member that orders fairly frequently. I do receive AWS product announcements, but I want those.


I've bought multiple copies of the same item from Amazon. Sometimes it's been groceries but not always.

I've bought books for myself then bought them again as gifts for someone else. I bet a lot of people who bought Switch games for themselves will buy more copies as holiday presents.


Yeah, but if you've already bought the product it isn't likely that you need to be marketed to in order to buy it again for the purposes you stated.


Certain products are purchased repeatedly: for example, anything consumable like paper towels, toilet paper, diapers. Certain other products are purchased multiple times, but with a delay in between purchases.

A final category of products are virtually never purchased multiple times except as gifts. Video games and other media most likely fall into this category, and targeting logic should understand that. I understand the OP's complaint.


If the business generated $1B last quarter, isn't that a $4B business?


Excellent point. The article was kinda hazy, but the original Amazon press release is here, and it confirms your take: http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-new...


We've taken taken the hard number out of the title above to side-step the possible inaccuracy.


Meaning its only 2x smaller than worldwide facebook (ad) business, while growing at 50%.

Conclusion: alibaba & aliexpress are the real kings, forget about amazon.


The online business has really migrated from a long-tail exploration business to one where people just go with the masses and buy the 'No. 1 in Category' product. Now giving companies the chance to take such a top spot and proving the value of that positioning by being able to verify that the purchase was completed is an amazing asset to have. That shot at being the first trillion dollar company is getting better and better.


That is only part of Amazon's advertising business. If you read their 10-k:

"Vendor Agreements We have agreements with our vendors to receive funds for advertising services, cooperative marketing efforts, promotions, and volume rebates. We generally consider amounts received from vendors to be a reduction of the prices we pay for their goods, including property and equipment, or services, and therefore record those amounts as a reduction of the cost of inventory, cost of services, or cost of property and equipment"

http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-sec...


What's the insight here? How they handle the accounting of it?


i think the insight is that if you count all the other advertising revenue that they book as "cost reductions" instead of standard revenue, then they're making a lot more than $1b per quarter off advertising (or alternatively, the fact that they're making $1bn per quarter is not a new thing)


I think insight is that these Billions encompass more than their "product listing ads" type business.



what if that advertising revenue goes towards offering even lower prices to customers? would that be an acceptable tradeoff? say, out of 1$ generated from ads on amazon.com, 80c set aside for offering lower prices, and 20c for running costs etc? I don't know if that's the case, just curious if it'd be OK if that was the case.


Competition is good, even for heavens and hells.


As always, adblocker is your friend.

I don't really see that Amazon can go so bold to block customers that come to the websites with adblockers on, unlike other business like Youtube/Facebook. After all it is a retail website, ads is just easy money they collect on the way.


I refuse to believe a single number about the online ad business while things like this are going on:

http://fortune.com/2016/12/20/methbot-ad-fraud/




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