Advertising is still just a small piece of Amazon’s growing empire. But “small” is relative. In 2017, the company’s ad business generated $2.8 billion, making it bigger than the ad platforms managed by Twitter ($2 billion) and Snap ($800 million). Only three online ad platforms outrank Amazon’s: Google, Facebook, and Oath.
The bulk of Amazon’s ad revenue is generated by placements within Amazon.com. For example, sellers pay to appear in search results, or display custom banners above the results. Some, like toy company Melissa & Doug, shell out additional dollars for custom Amazon home pages. But the retail conglomerate has also started to explore ad placements across the wider web, as well as within Alexa and Prime Video. Marketers, drawn by Amazon’s wealth of shopper data, have been eager to experiment. Last spring, WPP acquired an Amazon-focused consultancy.
“The interesting shift is starting to think about using shopping behaviors as triggers for other categories,” says Nick Pappas, CEO of SwellShark, a New York-based agency that has worked with clients including Dos Equis and Shinola. “That, for me, is where is Amazon is so exciting.”
Even brands that don’t sell on Amazon have started to ask questions.
“We’ve been testing it with different clients,” says Abbey Klaassen, CMO of agency 360i. “It all comes down to performance. Does Amazon perform as well as other media platforms?”
Pricing predictability remains a challenge. “The prices for what you can buy on Amazon range widely,” Klaassen says. Other marketers complain that Amazon’s targeting capabilities are nowhere near as precise as those of Google or Facebook.
But in one increasingly important area, Amazon has a clear advantage over its established rivals: identity.
“Amazon knows when it’s a human,” says John Donahue, a digital media strategist (disclosure: he has consulted for Fast Company). “Amazon has real people that they’ve profiled cross-device. They have the ability to understand what they’re purchasing. That’s powerful. Lo and behold, a good amount of advertisers are like, hell yeah. People are clawing onto it.” Donahue has seen innovative advertisers start allocating 10-15% of their budgets to Amazon—”which is crazy as an entry player.”
Amazon reports Q4 2017 earnings on Friday. We’ll be listening in for any mention of the ad business or its leader, Seth Dallaire.
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