Why Amazon’s Programmatic Push Matters?

The programmatic advertising landscape is about to get a whole lot more crowded. Amazon, the retail titan, is setting its sights on this multi-billion dollar industry, and its entry is no small shakeup. While established giants like Google and Facebook hold significant sway, Amazon brings a unique set of advantages: a treasure trove of user data, a comprehensive view of the consumer journey, and a relentless focus on innovation. But is Amazon's programmatic push a recipe for disruption and progress, or a cause for concern about competition and privacy? Let’s explore the potential impact of Amazon's programmatic ambitions, examining both the exciting possibilities and the challenges that lie ahead.

Will it reshape the ecosystem?

Amazon isn't just another player – it's a retail behemoth with a unique advantage: a complete view of the buyer's journey, from browsing to purchase. This raises a fascinating question: will Amazon revolutionize ad targeting, or will its dominance raise concerns about privacy and competition?

With Amazon's formidable presence in both retail and advertising, how can we envision its entry into programmatic advertising reshaping the landscape, particularly in comparison to established players like Google and Facebook?

Caitlin Borgman, Chief Commercial Officer, ID5, asserts that Amazon’s entry into the programmatic space could significantly diversify the advertising ecosystem. According to her, compared to some of the other big players, Amazon has the most comprehensive back to front end solution. But Google and Meta still have a stranglehold on the industry; so Amazon must be strategic as they enter this space.

“If the goal of advertising is to sell, then Amazon Ads is in a great position. Amazon has access to transaction data which allows them to support both sides of the advertising equation. Consider the fact that both brands and publishers use AWS for web hosting as well as Amazon Retail for consumer transactions. These numerous and critical connections with buyers and sellers make Amazon the best equipped platform to connect hosted data with ad targeting and sales measurement. So it’s not surprising that Amazon Ads has been its fastest growing business unit even though it’s relatively small compared to AWS or Amazon Retail. This isn't a bad thing; this just means there is more room for growth. It’ll be interesting to see the impact they’ll have on newer channels like audio (Audible) and CTV (Amazon Video),” says Borgman.

In the realm of digital advertising, Google and Facebook have long been the go-to platforms for accessing high-intent signals at scale, earning trust as the largest and most reliable sources, points out Raj Swaminathan, Senior Director - Revenues and New Initiatives, Globale Media.

However, Swaminathan adds, the landscape shifted dramatically with the rise of e-commerce and the unparalleled growth of online and in-app purchasing spearheaded by Amazon. He points out that Amazon has emerged as a formidable third-largest source of high-intent data, introducing a significant transition from probabilistic to deterministic data.

“This transition brought sharper categorization cohorts and a heightened emphasis on ROI and ROAS. Additionally, Amazon's impact extended to providing full-funnel visibility for advertisers and agencies, enabling comprehensive measurement of campaign effectiveness across all stages. This evolution marked a departure from the previous "Spray & Pray" approach, allowing advertisers to sharpen their targeting efforts not only within core product categories but also adjacent product categories. Ultimately, Amazon's entry into the advertising arena has reshaped the landscape, offering advertisers unparalleled value by delivering deterministic signals and refining targeting capabilities,” says Swaminathan.

Transparency and efficiency

Amazon has been vocal about the need for greater transparency and efficiency in the programmatic advertising ecosystem. How will their efforts influence industry standards in areas such as data privacy, auction mechanics, fee structures, and overall programmatic ad space?

It’s tough to say, says Caitlin Borgman. She points out that Amazon has a relatively closed ecosystem which allows them to control the system within their own walls.

“Amazon’s influence will continue to grow as they increase their dominance and open up their system to more third-party players. The other side of the coin is Amazon will also open itself up to more criticism and regulator involvement. When it comes to fee structures, Amazon faced backlash in the past when it came to seller fees. So there are some checks and balances in place. When looking at the data privacy landscape, the past few years we’ve seen big tech players move into a de-facto regulator role. In some cases this has been beneficial in bypassing governmental bureaucracy to drive positive change. In other instances it has slanted the playing field and isn’t always best for consumers or small businesses,” Borgman says.

She adds that when it comes to privacy decisions that truly have consumer interests at heart these decisions should be made with input from big and small players including watch dogs, industry councils, and government officials.

Raj Swaminathan reckons that transparency has become a pivotal focus in the industry, with Amazon and other major platforms capitalizing on its significance.

“Across the board, initiatives are being spearheaded to address critical issues surrounding privacy, sustainability, and measurement, and Amazon is no exception. Efforts are underway to enhance the visibility of sources, publishers, and viewability while integrating with third-party trackers and implementing robust verification and fraud protection mechanisms. Amazon stands out by ensuring the compatibility of its DSP with leading measurement tools like Moat, Double Verify, and IAS, providing advertisers and agencies with comprehensive transparency and control. Moreover, Amazon maintains transparency by openly communicating platform changes and equipping advertisers with a console that offers advanced features, reinforcing trust and confidence in the platform,” states Swaminathan.

Supply chain dynamics

One of Amazon's strengths lies in its ability to offer integrated solutions across various business functions. How might their involvement in programmatic advertising transform the advertising supply chain and empower brands with greater control and efficiency?

Raj Swaminathan points out that the crux of supply chain dynamics lies in the audience it caters to, and Amazon excels in precisely this aspect.

“With a user base exceeding 300 million in a country boasting 1.4 billion inhabitants, Amazon taps into a significant segment of the population with considerable disposable income and purchasing power. This vast audience base is the cornerstone of Amazon's success, setting it apart from its counterparts such as Google and Facebook. Advertisers are increasingly recognizing the value Amazon offers, leading to a significant shift in advertising budgets from Google and Facebook to Amazon, both globally and in India. The allure lies in Amazon's unparalleled full-funnel visibility and insights, extending to the lower end of the funnel. This depth of insights, ranging from marketplace visits to scanned products to added to cart to product purchases and beyond, represents a goldmine for advertisers, positioning Amazon as a transformative force in the advertising landscape, with other e-commerce and quick commerce platforms following suit,“ he explains.

Caitlin Borgman points out that Amazon’s involvement in programmatic advertising could streamline the advertising supply chain. “Some of the ways brands could benefit from this move would be greater control over campaigns and the ability to leverage Amazon’s rich data capabilities. This could potentially open the door for greater cross-channel advertising across web properties, in-app gaming, and advanced TV.”

Any advancements?

Given Amazon's reputation for innovation and technological prowess, what kind of advancements do you anticipate in programmatic advertising as a result of their involvement, particularly in terms of ad formats, targeting capabilities, and measurement metrics?

Again, Caitlin Borgman expects Amazon to keep their cards close to their chest during the development process. “Looking at their past initiatives and current data capabilities I would say we can expect a high quality and well thought-out rollout. It’ll be interesting to see what they bring to the table when it comes to measurement as this is something that the entire advertising industry has been calling for.”

The driving force behind many advancements in advertising technology lies in AI and ML, albeit considered a cliché, observes Raj Swaminathan.

He adds that among the most significant innovations is the predictive model, which harnesses AI and ML capabilities to forecast user behavior accurately. This model, according to Swaminathan, predicts not only what users are likely to purchase but also when and how they intend to make their purchase, enabling advertisers to strategically target their audience with timely ads and increase conversions.

“Additionally, automation plays a pivotal role in streamlining mundane tasks, facilitated by AI and ML technologies. Generative AI, in particular, automates the creation of assets, including creatives and copywriting, while also adapting messaging to cater to custom user segments. This automation not only enhances efficiency but also ensures personalized targeting, optimizing advertising campaigns for maximum impact,” says Swaminathan.

Potential challenges

Well, Amazon's entry into programmatic advertising might bring opportunities for increased competition and choice. But then there are potential challenges, especially regarding antitrust concerns, data privacy issues, and transparency within the ecosystem.

Antitrust and privacy concerns have long plagued all platforms, including the industry giants known as the BIG 3, says Raj Swaminathan. These issues, according to him, are nothing new to anyone involved in the digital landscape.

“What remains a pressing challenge is the ongoing effort to mitigate the impact of these concerns and utilize data transparently and equitably. Users, in particular, harbour apprehensions regarding the use of their data, leading to the reluctance to accept third-party cookies and advocating for their discontinuation. Users remain largely unaware of how their data is being utilized, and there are concerns about potential abuse or manipulation. Consequently, user consent becomes paramount, driving the growing prominence of First Party data. The effective management of these privacy challenges will pose a significant test for each platform moving forward,” he explains.

Amazon has had its fair share of privacy and antitrust issues in the past, says Caitlin Borgman.

“If they’ve learned their lesson from these past challenges then it’ll be smooth sailing. One way they can avoid antitrust violations is by continuing to collaborate with some of the smaller industry players. Unfortunately due to Amazon’s size and sheer dominance across e-commerce platforms it will continue to be a big target,” concludes Borgman.