Amazon ads are everywhere. It’s only the beginning | Hacker News Reader

Amazon ads are everywhere. It’s only the beginning

vox.com

17 pointsCorrado11 comments

Amazon Ads is going to be a really interesting corporate case study in ~10 years. A combination of factors are coming together that will eventually result in the death of Amazon's retail division.

Amazon has been doubling down on ads in retail search results over the last ~4 years. Ad load (e.g. "Sponsored Products") has been steadily increasing. One of the main reasons is that Ads as a group has incredible margins (the marginal cost of displaying an advert is ~$0). As a result, Ads has been crushing all KPIs, leading to more resources dedicated to the Ads org. The growing teams and increased headcount in the org have had to justify their existence through revenue growth. What's the easiest way to grow an advertising org? Show more ads!

The above is simplifying things, but the bottom line is that Amazon.com today shows a lot more ads than four years ago. Concurrently, Amazon has aggressively shifted away from directly selling goods itself towards third party sellers. Amazon.com is now predominately a marketplace of third party sellers all competing against each other to appear at the top of the search results. The only way to consistently appear at the top of retail search results is to be the highest bidder for marketplace ads.

All of this has really distorted incentives for third party sellers. They no longer need to have the best product to get sales. They're incentivized to spend more on ads and less on the product itself. Product quality is noticeably worse than in the past and it's still getting worse. To battle that, sellers leave fake reviews. Customers lose trust in Amazon and become more wary of what they buy.

These factors are self-reinforcing -- hence why I think Amazon will be an interesting case study. Once you lose customer trust, it's hard to get it back. They can try to combat this with a great return policy and customer service, but the incentives are still misaligned.

Context: used to work for Amazon Ads org

Do you think Amazon will eventually discontinue first party products ? Like essentials, basics etc

Internally that's the long term goal. Essentials/basics lines exist because Amazon has superior data on what their customers search for and return rates etc. Parts of leadership wants to open up more of that data to third party sellers and let the free market sort itself out.

Thanks for your insight. I'll be sad if it all goes away. I have an Amazon brand couch, bought a bunch of Amazon brand clothes and it's all been really good.

It seems like a lot of the big tech companies are playing some version of this tune. Everything keeps getting more aggressive and intrusive. There's ads literally everywhere and it will only get worse. It's all so hostile and anti-user, I really can't imagine how these companies think this will be sustainable.

My bet is the advertising bubble will burst this decade. It should be a spectacular show.

Interesting Amazon now makes more ad revenue than YouTube.

Intent is extremely valuable. If I search for something on Amazon it’s with the intent to buy soon.

I knew Amazon had ads in their marketplace but I didn't even consider Twitch or some of the other things mentioned in this article. And I'm not even against all advertisements, however I can't remember the last time an ad was beneficial to me and showed me something that I truly didn't know about and would like more information on. Most of the time I get the same ads over and over (looking at you YouTube) and they're not even for things I would ever purchase (Ford trucks, alcohol, gambling sites, etc.)

So, to see Amazon upping the Ad game just makes me sad and a bit angry. I already pay for Amazon Prime, stop forcing ads down my throat.

The goal of advertising can vary. Sometimes it's just brand recognition, since the average consumer is more likely to buy from a brand they know and trust. Other times it's about pushing an idea or feeling, for example Ford is really pushing their EV pickup trucks because they want people to associate that with Ford. Otherwise, many advertising platforms are actually pretty dumb and just aren't very good at showing relevant ads.

In no way am I advocating or supporting any of this. I hate and loathe advertising and wish we could be rid of it altogether.

It seems that this isn’t the case for the average person. I too can’t stand ads, but when I express that I use ad-blocker or go well out of my way to avoid ads, people look at me as if I am an alien.

> “Amazon is always inventing to ensure that our advertising products help customers discover selection they love and help sellers cost-effectively succeed in our store,”

> One multimillion-dollar Amazon seller in the apparel category said his firm has had to double their advertising spend on Amazon over the past three years, and subsequently raised their product prices by 20 percent earlier this year.

> Some said that the pay-to-play evolution of the site is one of the top two reasons they have had to substantially raise the prices of their merchandise on Amazon over the past year.

Sounds like the ad plan is working out great to help Amazon keep their prices low.

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