Amazon's $14 Billion “Ad” Scheme Puts Google in the Crosshairs of a New Advertising Giant...

Amazon just announced it’s opening up its advertising playbook to other retailers, and if you’re getting déjà vu, you’re not alone. We’ve seen this movie before—except instead of AWS revolutionizing cloud computing, this time it’s Amazon’s ad tech aiming to rewrite the rules of retail advertising. Introducing Amazon Retail Ad Service, the ecommerce giant’s latest move to extend its influence beyond its own platform and into the online stores of, well, everyone else.

(Source: Giphy) 

Here’s the pitch: Amazon will let retailers use its homegrown ad tools to run targeted campaigns on their own websites. Think sponsored search results, product page ads, and all the other stuff that makes you wonder if your browser history is psychic. And because this is Amazon, the offering comes with a promise of “contextually relevant ads” and access to its powerful measurement and reporting systems—because who doesn’t like data-driven ads that actually work?

Now if this sounds like Amazon is gearing up to become the Google of ecommerce ad tech, that’s because it probably is. But let’s circle back to that in a minute.

(Source: CNBC) 

In short, Amazon’s ad business isn’t exactly a side hustle. It pulled in a staggering $14.3 billion in revenue last quarter, making it the third-biggest player in digital advertising behind—you guessed it—Google and Meta. And while $14.3 billion is nothing to sneeze at, it’s still just a piece of Amazon’s overall revenue pie. That means there’s plenty of room to grow, and Retail Ad Service looks like the next logical step.

However, here’s what makes this move so interesting: See, up until now, Amazon’s ad revenue has been largely tied to promoting products on its own platform. Sponsored posts, keyword-targeted ads, and even Prime Video ad slots—those have been the bread and butter. But Retail Ad Service flips the script by taking Amazon’s ad infrastructure and making it available to outside retailers. It’s like AWS for ads, but instead of selling server space, Amazon’s selling its ability to make your online store look and feel like a mini-Amazon.

(Source: AdWeek) 

Naturally, retailers are already frothing at the mouth with this. Companies like iHerb, Weee!, and Oriental Trading Co., give us a hint at Amazon’s initial target audience—small-to-midsize players who want to level up their ad game without building out their own tech. But don’t be surprised if bigger names start getting horned up about it, especially as the promise of better ad performance (and more sales) becomes harder to ignore.

But, but, but… what’s in it for Amazon? Well, Amazon isn’t doing this out of the goodness of its heart. In addition to the revenue it’ll collect by licensing its ad tech, the real prize here is data. Yes, Amazon insists that retailers’ data will remain separate and be managed through AWS accounts. But at the same time, every ad that runs through this system gives Amazon more insight into consumer behavior, ad performance, and market trends.

(Source: Giphy) 

Translation: even if Amazon isn’t technically accessing retailers’ proprietary data, it’s still getting smarter every time someone interacts with an Amazon-powered ad. That’s a feedback loop that could turbocharge its ad prediction and recommendation algorithms, making its own platform even more effective. It’s the kind of long game that Amazon has played before—remember when AWS was just a flash in the pan side project? Exactly. 

At the end of the day, whatever comes from this—retailers are losing their collective minds here. Better ads, more sales, and a chance to compete in a digital landscape that’s increasingly stacked against them? Done deal. But again, this isn’t Amazon’s way of being a charity case—it’s about Amazon becoming the landlord of the internet ad space, while everyone is just happy to be a part of it. 

(Source: Giphy) 

In the meantime, do what you will with this information and place your bets accordingly. Amazon is continuing to show everyone it has some strategic chops up its sleeve—and if you’re betting against them… maybe don’t. Especially since they didn’t become a $1.3 trillion company by playing small ball. As always, stay safe and stay frosty, friends! Until next time…

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Stocks.News holds positions in Amazon, Meta and Google as mentioned in the article.