Tension Over Algorithm Roils Amazon Retail, Search Teams

Amazon’s search algorithm can make or break a product. Sources are now saying that the tech behemoth adjusted its system late in 2018 so that products that bring it bigger profits get the most visibility. That could include Amazon’s own brands over products that might be more relevant and popular. The tweak in the algorithm took place against the backdrop of ongoing tensions between the executives running Amazon’s retail businesses, who wanted the switch, and those at A9, the company’s search team, who did not.

The Wall Street Journal reports that, according to marketing analytics firm Jumpshot, Amazon’s “search bar is the most common way for U.S. shoppers to find items online, and most purchases stem from the first page of search results.”

Regulators in the U.S. and the European Union are currently scrutinizing Amazon for potential anti-competitive behaviors in favoring its own products rather than those of third-party vendors in its marketplace.

According to WSJ, the A9 search team believed that the “profitability push violated the company’s principle of doing what is best for the customer.” “This was definitely not a popular project,” said one source. “The search engine should look for relevant items, not for more profitable items.”

Amazon spokeswoman Angie Newman, however, denied the charges, saying that the company has “not changed the criteria we use to rank search results to include profitability.” But Amazon also “declined to discuss the inner workings of its algorithm or the internal discussions involving the algorithm, including the qualms of the company’s lawyers.”

The House of Representatives, at an antitrust hearing and by Judiciary Committee leaders, recently challenged Amazon on whether its search algorithm favors its own products.

Sources said that “executives from Amazon’s retail divisions [especially its private-label team] have frequently pressured the engineers at A9 to surface their products higher in search results.” Marketplace Pulse reported that Amazon sells 10,000+ products under its own brands, but its private label business only represents “about 1 percent of retail sales … less than $2 billion in 2018.” SunTrust Robinson Humphrey estimated that this business will grow to $31 billion in sales by 2022.

Amazon executives have argued that grocery stores sell their own products next to national brands, but “A9 executives pushed back and said such a change would conflict with chief executive Jeff Bezos’ ‘customer obsession’ mantra.” The first of Amazon’s 14 leadership principles is that managers “focus on earning and keeping customer trust above all.”

A9 operated independently for many years but now reports to Doug Herrington, the head of retail, and his boss Jeff Wilke, chief executive of global consumer. Amazon also took down its A9 website.