Amazon has introduced a new display ad offering that lets retailers in its marketplace follow shoppers as they browse the Internet and attempt to lure them back to buy on Amazon. The tool gives sellers broader reach by letting them bid on ads that will appear on other websites and apps, although Amazon doesn’t specify where. But sellers only pay Amazon when potential customers click on the ads. According to sources, the company is currently inviting a handful of merchants to test the new digital ads later this month.
Bloomberg reports that, Amazon’s “assertive step … into the digital-advertising market … threatens multibillion-dollar revenue streams at Google and firms like Criteo.” French firm Criteo used this so-called re-targeting technology to generate $2.3 billion in revenue last year.
Although this kind of marketing is “a massive industry,” it’s “also sometimes a challenge to prove that the spots lead to actual purchases.” According to eMarketer, by 2021, advertising on websites and mobile devices will capture half of all U.S. ad spending, a “greater share than television, radio, newspapers and billboards combined.”
Amazon generated $1.7 billion in revenue in 2017, said eMarketer, while Google brought in $95 billion, UBS “estimates its display ad network will reach $38 billion in revenue this year,” and Facebook generated $40 billion from ads in 2017.
With the new tool, Amazon will “get a bigger slice of transactions on its site,” adding a charge to merchants “to help drive traffic to their listings on its own site.” The company already charges sellers commissions for each purchase on its marketplace, and for use of Amazon’s logistics services for storage, packing and delivery.
Skubana co-founder Chad Rubin, whose company sells e-commerce management software, said, “Amazon is introducing the product to bill merchants for ads that Amazon used to run on Google search.”
“They are going to make this a platform and make money from it instead of doing it for sellers pro bono,” he said. “It gives sellers more reach, but they have to pay for it instead of giving it to them for free.” While sellers fret, “many analysts are keen on Amazon’s ad push because it’s more profitable than selling things online.”