How Amazon Ads Might Change the Game

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Will the Great Recommender introduce "pretargeting" to the menu? Is it destined to become the King of Conversion? Or will its ad business simply settle in between Google's and Facebook's?

When Amazon begins letting third-party advertisers tap into its shopper database and buy placements on Amazon.com later this year, as is widely expected, the ground will shake a little in the marketing world, say digital marketing insiders.

One who's familiar with the company thinks Amazon's been planning this for some time, just like its biosphere-adorned new headquarters in downtown Seattle (above). "They've been building their own proprietary database and not letting any other networks touch their shopper data,” says Josh Boaz, managing director of Direct Agents, a digital agency that counts Amazon as a client. “Amazon is bringing something new to the party. When people are on Facebook, they're in social mode. On Google, they're information searching. When they're on Amazon, they're shopping.”

Boaz, whose agency works largely for direct response marketers fielding performance-based campaigns, thinks an Amazon ad network could lead the pack in conversion rates. “Amazon has their users' credit card information, they know their browsing history. It's a very powerful thing,” Boaz says. “It's like knowing everything about someone who just walked into Walmart. For e-commerce companies, this is going to be a boon.”

Ogilvy & Mather's Chief Data Officer Todd Cullen sees clear advantages for an Amazon ad venture. "Transactional data, what people did, is better than search, what people might do," he says, "but it's still display and I'm not convinced it's a great conversion channel. Also, it will be expensive, so I'm not sure how much advertisers will pay for the audience."

Online advertisers' overwhelming  adoption of retargeting is one of the driving forces behind both display and search ads hitting $20 billion this year. But a tech industry venture capitalist believes that Amazon has it within its power to introduce a marketing tool that could prove even more impactful.

“Amazon has the unique opportunity to use its database and its mastery of collaborative filtering to create a pre-targeting version of display ads,” says Metamorphic Ventures Managing Director David Hirsch, a Google veteran who helped devise the search engine's monetization strategy. “In the early days of Google, people said Google's really great at consideration of the purchase intent. But there are very implicit data points that Amazon might be better at. They have this greater breadth of personalization and levers. I look at it as the next wave of discovery—not people searching for things, but introducing people to things.”

At Ogilvy's digital media agency Neo, Director of Omnichannel Marketing Alex Andreyev sees the possibility of Amazon serving as an interstitial glue between digital channels. “Obviously, Amazon has a ton of data sets. They know people's reading habits, their purchase intent. They have a pretty good grasp on mobile,” Andreyev says. “All of those things give them a great perspective on the marketplace, and I think what they're looking to do is to connect all the dots around marketing to the individual.”

Adreyev's colleague Cullen agrees. "The real power would be combining this data with other types of data to achieve a fuller view of the customer," he says. "I'd want to use the data along with other data for modeling and then reach those audiences across all channels."

But not all influencers in the ad tech world see Amazon advertising as the second coming. David Rodnitzky, whose 3Q Digital handles more than $300 million annually in digital ad placements for clients, believes that distinction will continue to belong to Facebook.

“First,” Rodnitzky says, “Amazon tends to keep the good inventory to itself and only release ad inventory when they don't think they can better monetize space directly. I would assume that Amazon would take the same approach to an external network. Second, Facebook has reams of data from both on-Facebook behavior and from third parties that use Facebook connect for registration. Combine this with the fact that Facebook is not a competitor to the people it is trying to sell advertising to and I think Facebook poses a far more realistic threat to Google's AdSense network than anything Amazon might concoct.”

Perhaps, but Amazon CEO Jeff Bezos has a track record of dominating any retail segment he chooses to enter. Whatever moment he chooses to enter the display ad business, then, is likely to alter its course for good.

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Founded in September 2009, Stirista is an integrated marketing agency that specializes in ...