Earlier this week, Amazon confirmed it was shutting down its pay-per-click “product ads” that showed links and photos at the bottom of search results and diverted traffic out to other sites.
Product ads were popular among e-commerce brands because the format allowed them to partner with Amazon, but without Amazon seeing their transaction data. Ad sellers like Google were able to use the ads to get information about Amazon’s users, which enabled them to hone up ad targeting on their own platforms.
Amazon is now plugging that hole, which was allowing hundreds of companies to essentially steal chunks of its online advertising share by using its own data (for a price.) Now brands that want to advertise their products on Amazon.com will be pushed towards selling their ads on Amazon.com too. Amazon is offering an olive branch for those that still want to link out of Amazon.com to their own sites by testing “text ads,” but as the name indicates, these won’t offer the imagery that is more likely to capture users’ attention and will be less of an attractive offering to retailers.
Amazon did not respond to a request for comment from Business Insider about the reason for the discontinuation of product ads. A spokeswoman e-mailed this statement to Reuters: “At Amazon we are constantly reviewing the services we offer partners to help them best reach our customer base and grow their businesses.”
According to analytics company Similarweb, Amazon sent 3.4 million desktop visits to Google.com ads over the past six months (February to July) in the US. That might, on the surface, seem like just small change to Amazon: outgoing visits to Google.com are less than 0.1% of the total 4.5 billion US desktop visits to Amazon.com over the same period. But each of those 3.4 million visits provided Google with valuable data.
Moshe Alexenberg, head of content at SimilarWeb, told Business Insider: “That does not seem significant to me, in terms of revenue. However, the data that Google collects through these ads may have more value than the percentages suggest. Thus, Amazon may want to prevent Google from collecting such information on its users and their online shopping habits.”
By shutting off outside access, Amazon’s move is in-keeping with a wider trend of platforms building up “walled gardens” around their advertising technology stacks. Earlier this month Google confirmed it was restricting marketers from buying YouTube ads via third-party companies through the DoubleClick ad exchange.
Nathan Barling, global chief data and technology officer at digital performance marketing agency iProspect, told Business Insider we are likely to see more of this trend as the commoditization of data continues, because data is a currency that’s worth a lot more than CPC clicks.
He adds: “Retailers using these links have access to a vast amount of search intent data. Once they understand the kinds of products that attract people away from a particular site, they can use that information to build an advertising audience. In this instance, it’s simply a question of what is more valuable: data or monetizing outbound links — with the former being the obvious choice. Whether or not it is good or bad for advertising, it’s likely to become the norm as businesses across the board seek to maintain as much of their data, and its value, as possible.”
Martin McNulty, CEO of digital marketing agency Forward3D, says Amazon’s move also indicates how the site is becoming as much a web portal as it is an online retailer.
He told Business Insider: “Portals have historically looked to monetise traffic in any way they could — and selling advertising was usually key. For Amazon it was logical: if they don’t have a product [listed on the site,] then why not sell traffic to someone that does? What’s changed for Amazon is that its range of products is growing wider, thanks to initiatives like Marketplace and so today, the chances of them stocking or selling via a partner is far higher. Why dedicate real estate to ads that might earn a dime when you could instead drive to a product that could help you earn dollars in profit?”
EMarketer estimates Amazon will generate $US1.26 billion in advertising revenue in 2015.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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