Amazon is on target to sell close to $1 billion worth of advertising this year. Using data from 237 million active customers, Amazon is quickly generating more ad revenue than other online advertising platforms. What is setting the online retail giant apart from competitive platforms like Google, Pandora, and Twitter? The power of purchase.
The data that Amazon collects enables the company to see patterns that Google and other rivals could never find. Unlike Google, Amazon captures not only what consumers search for, but also what they buy. With that insight, Amazon can connect the dots between consumer purchases to identify both the products a shopper is looking for and the consistency or repetition of purchase. Additionally, it’s easier to appeal to consumers when they are very ready to buy – as Amazon’s platform allows.
With such a strong upper hand, why isn’t Amazon already monopolizing the ad business? The company has been holding off on sharing their coveted consumer data – and will most likely continue to keep it protected to avoid alienating their customers. This has stunted Amazon’s growth in the ad-selling business, but they still made $70.5 billion last year on merchandise. The pressure of transforming into a top ad business isn’t as intense when you’re making money through other channels, and could face concerns with potentially alienating shoppers over privacy matters.
Amazon has still been experimenting with ad platforms, searching for advertising strategies that won’t turn away customers. While protecting customer data, Amazon plans to categorize shoppers under headings like “Fashionista” or “Gadget Geek” depending on their purchases. This will create thematic advertising messages, without giving away specific details.
The opportunities for Amazon to advertise extend far beyond their website. The company has been developing ads for services such as Amazon Prime Instant Video and Kindle devices (customers get a subsidized rate for devices with ads, and pay more for those without them). These video ads are not jockeying for immediate purchase on the site, but brands like Nissan and Geico are fans of the experimenting they’ve done to this point. These companies, like other advertisers, are constantly on the lookout for new venues that will get their branded content in front of consumers. The advertising opportunity could produce strong results if Amazon provides either better targeting opportunities or the chance to reach otherwise difficult to reach consumers. If advertisers continue to see success on the mega-online retailer’s platforms, the nearly $6 billion expected in US video ads sales, will have a significantly greater portion captured by Amazon.
For advertisers waiting for Amazon to begin to disclose their precious behavioral data, your wait may not be long: Both Madison Avenue and Wall Street are urging the company to open up and share the goods. In the meantime, consumers are getting more accustomed to being served ads from Amazon. As their comfort level increases, it could open the door to data sharing with advertisers.
