Amazon Is Said to Test Ad Tool That Rivals Google, Criteo
(Bloomberg) -- Amazon.com Inc. is taking its most assertive step yet into the digital-advertising market by testing a new display ad offering that threatens multibillion-dollar revenue streams at Google and firms like Criteo SA.
The tool lets merchants selling on Amazon’s online marketplace purchase spots that will follow shoppers around the web to lure the consumers back to Amazon to buy. The company is inviting select merchants to test the new ads later this month, according to people with knowledge of the plans.
Currently, merchants can buy other types of ads on Amazon, and the company has been giving more-prominent placement to these sponsored product spots in its search results. The new tool lets these sellers bid on ads that will appear on other websites and apps, giving them much wider reach. Merchants will only pay Amazon when customers click on the ads.
Amazon said it can help merchants target shoppers who have viewed their products or similar ones, according to an invitation to try the new tool that was viewed by Bloomberg News. The invitation doesn’t specify which sites or apps will carry the ads placed through Amazon. Amazon didn’t immediately respond to a request for comment.
This type of web marketing across sites and apps is a massive industry, but it’s also sometimes a challenge to prove that the spots lead to actual purchases. French company Criteo generated $2.3 billion in revenue last year with its re-targeting technology that lets companies track and serve ads to web shoppers that have shown interest in the past.
Criteo shares dropped as much as 7 percent in New York trading on Monday afternoon. Alphabet shares were little changed.
Amazon’s entry into this market shows the retailer is getting more aggressive with its nascent, but fast-growing ads business. By 2021, advertising on websites and mobile devices will account for half of all ad spending in the U.S., capturing greater share than television, radio, newspapers and billboards combined, according to EMarketer Inc. estimates. Amazon’s ad business generated $1.7 billion in revenue last year, according to the research firm. Alphabet Inc.’s Google brought in $95 billion from all ads last year, and UBS estimates its display ad network will reach $38 billion in revenue this year. Facebook Inc. took in $40 billion from ads in 2017.
Amazon has been using the ads business to boost revenue, helping it get a bigger slice of transactions on its site. The company already charges merchants commissions on each sale via its marketplace. It also bills for storage, packing and delivery fees for those using Amazon’s logistics services. With the new tool, Amazon will charge merchants to help drive traffic to their listings on its own site.
Some sellers are concerned that the service will give them a limited view of where ads appear online, reducing their ability to increase spending on sites that are performing the best, said Chad Rubin, co-founder of Skubana, which sells e-commerce management software. He 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," Rubin said. "It gives sellers more reach, but they have to pay for it instead of giving it to them for free."
In late April, Amazon abruptly stopped bidding to buy a popular Google ad that shows up at the top of Google search results, people familiar with the situation told Bloomberg News last week.
Many analysts are keen on Amazon’s ad push because it’s more profitable than selling things online. And Amazon is an ideal place to advertise since visitors come there to actually shop rather than simply browse, like they do on Google and Facebook properties.
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