The e-commerce company has so much information about us that it’s become expert at shilling us things we didn’t even know we needed. No wonder its advertising business is booming.
What if there were a company that knew what you wanted to buy before you did? What if it made shopping recommendations that tapped into your deepest desires? Better yet, what if it then made buying completely seamless? Would you ever stop shopping?
Amazon shareholders may like the answers to those questions. The company that revolutionized the way we buy has now gotten serious about selling the ads that tell us what to buy in the first place. It is selling advertising on Amazon.com, encouraging brands to create Alexa “skills” so they can market to people when they’re at home, and putting targeted ads on the main screens of its Amazon Kindles, tablets, and televisions. And it’s attracting money that brands used to spend on Facebook and Google.
On Thursday, Amazon reported that the category of its business devoted to advertising and “sales related to our other service offerings” made nearly $2.5 billion in net sales in just the third quarter of 2018. In the third quarter of 2017, it made less than half that, $1.12 billion. A September report from eMarketer estimated that Amazon is now the No. 3 digital-ad seller in the country, behind Facebook and Google. Brands will spend $4.61 billion advertising on the Amazon platform this year, the report estimated. Mike Olson, an analyst with Piper Jaffray, anticipates that Amazon’s advertising revenue will reach $8 billion this year, a number that will double to $16 billion by 2020, and that will soon overtake in profitability Amazon’s big moneymaker, Amazon Web Services, which sells cloud-computing services.
mazon is catnip to advertisers for the simple reason that it is already an integral part of the way we buy. About half of online shoppers start their product searches on Amazon. But the company also owns Whole Foods, Twitch, Zappos, Audible, and IMDb, and sells TVs, tablets, Kindles, Echos—what Helen Lin, the chief digital officer at Publicis Media, calls “this whole canvas of properties that allow brands to go broader.”
In other words, Amazon owns a large swath of the internet’s advertising real estate—but it also owns the information advertisers rely on to target ads effectively. It knows, with unprecedented precision and volume, what individual consumers search for and buy. It knows where we live, because it has our delivery addresses, and it may know where our family members live, if we use Prime to send gifts. It knows when we write reviews of products and what we think of those products. It collects information about what we watch on Amazon Video, what we read on our Kindles, what we listen to on Audible, and what we ask our Echo speakers. Facebook and Google may know who our friends are, what we’re reading, and what we think about politics—but Amazon knows almost exactly where and how we spend our money.
“That’s one of the powers of Amazon,” Olson told me. “They’ll be able to increasingly use the data that we have on our search history and product purchase history to improve the return on investment for advertisers, as well as the experience for users.” It sends us ads for products we probably want when we’re already in a buying mood, allows us to click on those products, and, without even making us reenter our credit-card number or address, ships those products to our front door.
It’s both eerie and comforting. We can be marketed to throughout our day—when we’re reading, watching TV, cooking dinner, browsing the internet—and we might not even mind it, because the ads we’re seeing are for things we actually want.
Advertisers love this. “It allows a brand to be part of a solution, as opposed to pushing an ad message,” Lin said. But it worries people like Alex Salkever, a futurist, a co-author of Your Happiness Was Hacked, and a self-described skeptical consumer of digital advertising. He researches a lot of sports equipment, and Amazon started serving him ads for sports products that were obscure, but appealing. “It was hard not to click,” he told me. “And this is from me; I am used to consistently minimizing my clicks.”
Amazon is so convenient, so trusted, so everywhere, that it could subtly begin to advertise in a way that encourages what Salkever calls “hyperconsumption.” For example, Amazon invites consumers to sign up for “subscribe and save” deals, whereby brands offer a discount on items like laundry detergent if consumers agree to get refills of that brand in the future. Amazon has little incentive to use its algorithm to ensure that customers get no more laundry detergent than their home actually needs. It also has little incentive to recommend that consumers get off their phone or computer or tablet and stop staring at consumer goods they want. As Amazon gets better at knowing what we want and need and anticipating our desires,“the system will grow more and more adept at pushing our buttons, putting in front of us goods and services that are closer and closer to what we actually desire,” Salkever wrote in an essay in Fortune.