“Amazon Advertising Platform leverages the same, pre-defined audience segments we offer for campaigns running on Amazon.com to show users more relevant ads—in much the same way Amazon has been recommending products to its retail customers for many years,” said an Amazon spokesperson to Adweek. “These segments have a minimum size, and are based on anonymous, aggregate data.”
This ad service reportedly generates $1 billion in annual revenue for the retailer.
Compared to its current platform, Amazon’s proprietary platform could be less profitable as advertising space will be sold based on a cost-per-acquisition model, rather than a cost-per-thousand-impressions model. But the platform has benefits, Amazon will be able to use its consumer shopping data to target users with advertisements based on their purchasing history. Neither Google nor Facebook has such a wealth of relevant information.
Furthermore, with Amazon Web Services, the company has no need for Google’s DoubleClick or 24/7 Real Media’s Open AdStream ad servers, and therefore can deliver its ads with Amazon branding.
CHEAT SHEET Analysis: Is This Launch a Positive Catalyst for Amazon’s Stock?
One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. As Adweek reported on Monday, many media buyers believe that Amazon has “the potential to seismically shift the online advertising market, with Google, Amazon and Facebook replacing Yahoo (NASDAQ:YHOO), AOL (NYSE:AOL) and MSN as online advertising’s holy trinity.”