Watch out, Google, Facebook, Apple. Amazon is coming for your advertisers
As noted by The Economist earlier this month, the "big four" of tech -- Google, Facebook, Amazon and Apple -- are increasingly playing in each others' sandboxes. Google and Facebook compete on the social network battlefront. Meanwhile Facebook is more than likely building a search ad business to compete with Google's and will probably buy its own ad platform too. And then Google is making its paid and organic search results more social to compete with Facebook. Amazon, the commerce company, sells media to compete with Apple's iTunes and now makes its own devices to compete with the iPhone and iPad. Bringing it full circle, Apple's iAd mobile advertising business is nothing to sneeze at.
Next year Amazon plans to crank up the competition further, with an aggressive push into advertising. According to an extensive profile by Tim Peterson in today's issue of Adweek, the company will offer realtime bidding that plugs into Pubmatic and Google's AdX, allowing advertisers to retarget outside of Amazon.com. (The commerce company revealed its plans for advertising in 2013 at Advertising Week in New York.) Peterson called the potential business a "weapon of mass destruction," which is a term I can't argue with.
Amazon The Advertising Company is a scary thought for the other big ad companies-- particularly if you look at what CEO Jeff Bezos has done to other industries he's entered. The company currently makes a tiny, tiny percentage of its income on ads -- they, along with Amazon Web Services and credit cards, represented less than five percent of the company's revenue last quarter. Amazon's ultimate goal is to use advertising to make its prices even lower, a scary thought for any merchant whose products have UPC codes.
An adtech ecosystem with cookies means Amazon can take its recommendation algorithm and retargeting outside its own site. That's a big business on its own.
An adtech ecosystem without cookies and with privacy measures such as Do Not Track (maybe, possibly) leaves Amazon even more well-positioned to take up the advertising torch. It's because the alternative to cookies is personally identifiable information. As the world's biggest online shopping mall, Amazon has that information, including your credit card and your browsing history on the site. And, for advertisers, that's just as valuable as Google's holy grail of advertising, search intent. (For privacy-concerned users, perhaps not so much.) Apple and Microsoft have been using their leverage in the browser wars to kill cookie-based advertising and thwart Facebook and Google, which profit from it. The inadvertent beneficiary of those actions is Amazon.
What's funny is that we for some reason trust Amazon with all this much information on us as individuals. According to a Placecast survey from earlier this year, the only company we trust more than grocery stores to use our data is Amazon.com. Sixty six percent of those surveyed were very comfortable or somewhat comfortable with Amazon using their data to promote relevant products. Grocery stores got 81% of the group's trust; Google clocked in at 41 percent. And then there's Facebook, which scored below credit card providers, merchants and cell phone service providers. Just 33 percent of those surveyed saying they were comfortable with Facebook using data for ad targeting.
It's one thing for Amazon to have the data, it's another for people to feel comfortable with them using it. Facebook, which sits on a treasure trove of data about us, is terrified to use it, thanks to the weekly privacy outrages (real or perceived), about the service. The company isn't even comfortable using Like data to serve gift recommendations yet. We are paranoid about the ways Facebook might exploit the intimate, emotional connections and personal photos we use the site for. Likewise, Google's myriad of essential web services make plenty of us paranoid. But our spending habits on Amazon, the site storing our credit card info? No problem!
Amazon probably hardly noticed last month when Facebook launched its latest attempt at commerce with Facebook Gifts. But next year, when Amazon takes a bite out of the core businesses of Facebook and Google with its advertising platform, I'm guessing there'll be a real fight.