NEW YORK: Online retail giant Amazon could be preparing for a major expansion into the online advertising market, with tests of a new ad placement platform expected to commence later this year.
According to reports, Amazon Sponsored Links will initially operate as an in-house system, taking on the role currently fulfilled by Google's AdWords product. Observers believe it will eventually move beyond that to challenge Google itself.
"Amazon could use the data it has about buying behaviour to help make these ads much more effective," Karsten Weide, an analyst at researcher IDC, told the Wall Street Journal. "Marketers would love to have another viable option beyond Google and Facebook for their advertising."
Reid Spice, vice president of media at digital agency iCrossing, echoed those thoughts. "Amazon knows a lot about how people are searching on the site and consumer preferences and histories," he said. "It can use that to tailor advertising in ways that probably nobody else can."
In addition to the ads that Amazon places on its site, it displays text-based keyword ads placed by Google and other third parties. Amazon Sponsored Links could enable it to step this up a gear, and not only displace Google-placed ads on its own platform, but also emulate Google by placing ads on third-party sites.
Apart from the revenues this may generate, Amazon would also retain greater control over the data generated by consumers searching and clicking on advertisements. While it buys traditional text ads on Google, the firm avoids enhanced product ads, according to analysts, because it doesn't want to share the information required to run them.
The Journal noted that the two internet behemoths increasingly resemble one other, with the product ads on Google looking more like those on Amazon – with images, prices and customer ratings – and Amazon offering online storage services and a smartphone.
Writing for Warc, Mark Curtis, chief client officer at service design consultancy Fjord, argued that digital brands such as Amazon, Google and Apple were all essentially customer-centred platforms that had shunned traditional business models to build powerful and direct relationships with their customers.
He said that the real motive behind Amazon's Fire phone was to draw customers deeper into its own multichannel platform. "The smartphone itself is really a means to an end – it's the services and the seamless relationship the product allows that really matter," he stated.
Data sourced from Wall Street Journal; additional content by Warc staff