Title: Is Amazon's Ad-Tech Sell to Retailers a Potential Threat? Examining the Debate
Amazon's recent announcement of offering its retail media advertising technology to competitors might initially seem like welcoming the fox into the henhouse. With Amazon controlling nearly 75% of retail media spend, according to eMarketer, and retailers historically avoiding Amazon's AWS cloud hosting due to competitive reasons, the proposition appears daring.
However, Amazon might still find partners, particularly among mid-sized and smaller retailers eager to kickstart their retail media aspirations. The potential advantages of the new "Amazon Retail Ad Service" are dual.
Firstly, partnership offers access to Amazon's extensive advertiser pool, with iHerb, one of the beta partners, already sharing 1,200 advertisers with Amazon. This collaboration allows retailers to deliver more targeted and personalized ads to their shoppers, as noted by Neil Folgate, SVP of Global Marketing at iHerb.
Secondly, retailers also gain access to a battle-tested technology stack, employed to power Amazon's growth into a $50 billion advertising business. Launched in 2014, Amazon's self-serve Sponsored Products ad type rapidly built an advertising technology ecosystem, from bottom-of-funnel retargeting to complex Connected TV ad buys. Accessing these advanced tools and insights could provide mid-sized and smaller retailers with a level playing field, as such capabilities are often out of reach.
Amazon also promises access to its extensive advertiser portfolio, which contributed to $14BN in Q3 revenue in 2024. Gaining a headstart with eager advertisers could be a significant advantage for retailers looking to boost their advertising revenue.
For those perceiving this as a Trojan horse strategy, there's a precedent in another major ecommerce player - Instacart. Instacart's Carrot ads platform has shown how a potential competitor could transform into a valuable infrastructure partner for retailers, provided the value proposition is compelling. Thrive Market, The Fresh Market, and Schnucks are grocery retailers that have partnered with Carrot Ads.
Nevertheless, data concerns remain tangible. As Mikael Brakker, L'Oréal Luxe's Europe Zone E-Commerce Director, warned in a LinkedIn post, "Amazon isn't just selling AdTech - it's selling dominance in the retail media ecosystem." Many retailers, like Walmart and Target, already avoid AWS due to competitive reasons.
This partnership could be even more intimate, even though Amazon promises to keep retailers' data separate through the use of AWS Clean Rooms. Handling data transparency and trust is paramount in this alliance.
In conclusion, while the benefits - sophisticated ad technology, access to major advertisers, and proven measurement capabilities - must be weighed against long-term strategic concerns about data control, competitive positioning, and ultimately giving Amazon's biggest competitor an edge, Amazon's bold bet on retail media could either democratize the industry or cement its dominance in another digital arena. For now, the industry watches with curiosity and cautious optimism.
[1] Enrichment Insight: Retailers can benefit from Amazon's vast advertiser base, advanced targeting, and data analytics capabilities. This partnership can make advertising more affordable due to the lower cost, advanced measurement capabilities, and increased ad revenue for retailers.
[2] Enrichment Insight: Retailers must ensure data transparency and trust when partnering with Amazon. Retailers can leverage Amazon's clean rooms mechanism to provide protected spaces for data analysis, ensuring confidential information remains secure.
[3] Enrichment Insight: Retailers can control their ad placement and formats to maintain a seamless shopping experience. Amazon's technology stack also simplifies the process for retailers, allowing them to manage multiple advertising campaigns and optimize them for better performance.
- The collaboration between retailers and Amazon's retail media advertising technology could provide them with access to a large pool of advertisers, as iHerb, a beta partner, currently shares 1,200 advertisers with Amazon.
- By partnering with Amazon, retailers can tap into a battle-tested technology stack that has powered Amazon's growth into a $50 billion advertising business, offering advanced tools and insights often out of reach for mid-sized and smaller retailers.
- Retailers can leverage Amazon's clean rooms mechanism to analyze data in a protected environment, ensuring their confidential information remains secure while collaborating with the tech giant in retail media advertising.
