16 ms·

Does Amazon make more from ads than AWS?

334 points by prostoalex 6y ago

anoncow 6y ago
Are we talking about ads on the Amazon app/site for products on the Amazon store? Or ads on other sites on the internet for Amazon products?
- lightbendover 6y ago
  Ad revenue that Amazon receives as a publisher, which comes from a diverse set of ad products served both on Amazon-owned sites and externally via their DSP.
  - tpmx 6y ago
    So basically they have figured out a way to keep a larger part of the pie from e.g. those randomly named PRC sellers? I may be slow here, but couldn't they just instead have raised the percentage they charge for sales? (Are those "external sales" really that large?)
    - Spooky23 6y ago
      My guess is that it’s a tax scheme. They probably run everything through different subsidiaries in different jurisdictions and make the capital intensive retail business as bad as possible, and shift losses or depreciation around to write down any earnings in the US or Europe. If the commerce division owes a big commission to Amazon Isle of Man, LLC, they “lose money”.
    - colinmhayes 6y ago
      They lure in 3rd parties to the marketplace with relatively low fees before the third parties realize no one sees their product unless they buy ads. By that point amazon has a bundle of their merchandise and a relationship so instead of pulling out they just buy the ads.
      - AussieWog93 6y ago
        That's not really 100% true. I sell a single product on Amazon (USB oscilloscope I designed a couple of years back), and have no discovery issues at all. It's the top product when you search for "USB Oscilloscope", and on the front page if you just search "Oscilloscope". I don't pay a cent in ads. That said, I did notice a huge rankings boost when signing up for FBA (as opposed to shipping the goods from overseas).
        tomcam 6y ago
        EspoTek? Because Siglent comes up first in AMZ organic searches for me. Not trying to bust your chops, just interested in this field.
        AussieWog93 6y ago
        Yeah, EspoTek. Interesting to hear that from you - Siglent appears third for me, and that's using an incognito window too (so it would be safe to assume any personalisation is off?).
        jefftk 6y ago
        > so it would be safe to assume any personalisation is off? Depends on whether Amazon is using fingerprinting to target ads
        vidarh 6y ago
        You come first of the organic results for me on amazon.com (with an "Amazon's choice" label), but is nowhere to be seen on amazon.co.uk
        adventured 6y ago
        Just for a data point, in a private tab, when I search Amazon for "USB Oscilloscope" my first three results in order are: EspoTek, Hantek, and then Siglent. It lists EspoTek as "Amazon's Choice". Same results as when I'm signed in. I'm in the US.
- ehsankia 6y ago
  This is basically Amazon getting sellers on its site to pay money to be ranked higher in search results, and since result ranking is so competitive, companies basically are forced to buy out the keywords for their own products/brand name to avoid other competitors outbidding them. Sometimes, searching stuff like "Dyson" or "Roomba" will give me results from cheap knockoffs before the actual brand I'm even looking for.
deleted 6y ago
[deleted]
einpoklum 6y ago
I've already heard it said that if you have the notion that Amazon is not competing with your business then you've probably just not been following its activities lately.
- judge2020 6y ago
  Just to name a few, Amazon is not competing with: banks, cars (rivian is _an investment_, it's not owned by AMZN), almost all direct manufacturing eg. semiconductors or displays, apartments.com, vacation planning, etc.
  - NicoJuicy 6y ago
    Almost none of those are on amazons e-commerce platform either
    - judge2020 6y ago
      Given > if you have the notion that Amazon is not competing with your business you would think OP is talking about industries in general, much like how AMZN is moving into a bunch of other industries like online payment processing (Amazon Pay), grocery (Whole Foods, Amazon GO), etc. They certainly aren't moving into every industry, probably because these industries already are low-margin or don't have a clear path to growth under Amazon disruption.
  - deleted 6y ago
    [deleted]
  - 3np 6y ago
    Your point stands, but they arguably do compete with banks through their credit cards/financing. Not sure how it looks in other countries but here in Japan it’s not insignificant. Right now they do it through a JV or sth with SMBC but surely it’s just a matter of time until they get serious there.
  - dekervin 6y ago
    I woud not put cars past them. One profitable area that will experience the autonomous driving revolution is logistics.
ChuckMcM 6y ago
This is a good read. For a long time I explained to people that the value of search advertising was that it matched a buyer who had just asked a buying question with advertisers who wanted to answer that question. This was HUGELY different than previous Internet "banner" advertising. Think of it this way; I put a poster up in the metro that says "Best Deals on Rolex watches" and a million people a day "see it" but a vanishingly small number want to buy a Rolex. However, if Google gets a query "Where to buy a Rolex" or "best deals on Rolex watches", well you know that person is perhaps already considering buying a watch, so you want first crack at the deal. The secret sauce was instantly pairing "commercial intent" (or the intention to do some commercial action, buy, sell, hire, Etc.) with vendors and firms who can satisfy that intent or "aspects" of that intent. (You might get an Uber ad on a query for "restaurants near me" for example) Amazon has that in spades. If you are on the Amazon site, that is a huge signal that you are intending to make a commercial transaction. Either with Amazon, or perhaps you are reading reviews of things you can get locally, but the probability that you are about to do something commercial is much much higher. (So does Facebook along a different vector but that is a different post for a different time.) I know from experience at Blekko that one way to piss off Amazon is to out advertise them :-). That just told me that they considered Ads strategic and selling stuff was secondary to that goal[1]. [1] I reasoned it this way, if selling stuff was primary then any additional exposure is "good" even if you have to pay affiliate fees for it. If advertising was the money maker, then someone doing it better than you (converting your ad revenue into their affiliate revenue) then you respond harshly to that.
- gundmc 6y ago
  Google and Facebook are going to get screwed. They'll get hit by antitrust action (even if just more fines and settlements) while also under the radar losing market share to Amazon via market forces, which ironically is an argument against taking antitrust action against the formers.
- tyingq 6y ago
  The pricing for the click might kill off any benefit over less targeted advertising though. I poked around in keyword planner, and one click for some rolex related phrases costs $3-$10. I imagine you would have to do quite a lot of expensive experimentation to figure out how to make that profitable.
wmf 6y ago
It's pretty depressing that the worst parts of Amazon (the shady marketplace and ads that don't look like ads) might be the most profitable because it means they won't be reformed or eliminated.
williesleg 6y ago
They make more from taking advantage of everyone and everything.
cm2012 6y ago
Amazon makes more revenue from ads than Youtube does (and Youtube makes 100x what Reddit does). That's nuts. Chart of each ad/marketing channel by spend for context: https://www.rightpercent.com/b2b-guides/which-marketing-channels-are-best-to-grow-your-business-2020-update https://www.rightpercent.com/b2b-guides/which-marketing-chan...
- ohashi 6y ago
  When I am already on a marketplace trying to buy something, the intent value and timing of it makes it infinitely worth more than random videos, at best re-targetted because i previously visited something.
- judge2020 6y ago
  Makes sense given Amazon visitors are already pre-disposed to purchase something while the vast majority of YT viewers aren't.
- deleted 6y ago
  [deleted]
- Supermancho 6y ago
  RightPercent: B2B AGENCY FOR FACEBOOK AND GOOGLE I'm not sure what data that shows, but I'm confident it's not showing anything but the "public data"...which is a simple excel spreadsheet, hosted on Google by "someone". If you search for the doc id (16HWY3ytQY0kMEFCoJKAwkjO2dr6x0-Nm146-taLpf7A) it's a couple RightPercent posts...probably because they pulled it out of their ass for their own sales pitch.
- IPTN 6y ago
  I understand this is probably against HN[PolicyNo], but I just came across your comment in another thread that is locked from being ?too old?. It was the Google FloC Post where you stated you wouldn't work on gambling or alcohol ads. This is an area that I recently had to personally struggle with my own personal morals. I wasn't working in ads specifically but marketing. I guess I just wondered if you would be willing to share any thoughts you have on how you find that line of what is acceptable regarding feeling ok to work on something or walk away. Specifically my dilemma is less that about caring about what someone's vice might be (it's not up to me to moralize or decide for people what is 'good'/'bad') but more so that in my opinion we as a humans can be exploited through *technically sophisticated* approaches no matter how much we each think we are immune to that kind of influence; so under that premise, how do I know when some proposal is evil or at least I won't feel good about it when delivered.
mensetmanusman 6y ago
I noticed that almost the entire front page of results now on Amazon are sponsored results. It’s winner winner take all, all the way down.
- Zenst 6y ago
  Yip they have their hands in all the pies with the exception of bank accounts, though with Amazon gift cards almost treated as currency - they are not far from that already.
mountainb 6y ago
It's because Amazon's ad platform has been the best ecommerce ad platform for the narrow and profitable purpose of direct sales basically since the day that it launched. Google let Amazon take a giant bite out of Shopping because it was complacent with its also profitable business model of absorbing giant corporate black hole ad budgets and earning multi-hundred dollar clicks off of people like personal injury lawyers.
- ramraj07 6y ago
  I just went through a rabbit hole of sites about adwords for injury lawyers and my mind is blown by how obvious and expected it is but it’s still insane to think of a single click being billed 200$. But it makes perfect sense, adwords is far more suited to for this purpose and it’s one case of everyone getting what they want (except the dude getting sued) so why not? Google is getting healthy competition in the ad space so within that dimension it’s great? If we now just ensure the Amazon workers can unionise and put amazons more physical manifestations on check then this is a better situation overall than whatever we have now.
  - gscott 6y ago
    I run a commercial insurance campaign with clicks from $25 to $45 each but it works and provides the whole company with enough leads the renew the next year to make it worth it but it costs $120k+ a year. Google has figured out how to make the organic list as irrelevant as possible.
JumpCrisscross 6y ago
> it doesn’t make money, it sells below cost, it’s subsidised by investors and in particular it’s subsidised by AWS Who makes this claim? It’s idiotic on its face, and disproven by their filings.
- danielmarkbruce 6y ago
  Whether it's right on wrong, it's not disproven by their filings, at least going back a few years. For a very long time Amazon was running at break even or thereabouts. Additionally, while the argument that Amazon had some very profitable lines of business seemed reasonable, it was never clear that Amazon could just choose the profitable ones and leave the losing ones. Loss leaders is a thing. AWS has subsequently made Amazon look amazing and they are obviously worth an ungodly sum of money, but if it weren't for AWS it would still be unclear how good of a business Amazon really is. Even ads isn't a business they get to be in for free. They couldn't just shut down Amazon's direct lines and be all ads + marketplace.
- chx 6y ago
  > Who makes this claim? Matthew Yglesias did in 2013. https://slate.com/business/2013/01/amazon-q4-profits-fall-45-percent.html https://slate.com/business/2013/01/amazon-q4-profits-fall-45... > That’s because Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. And while it was a good quip it might not have became so famous if Bezos didn't quote him unattributed a few months later in a letter to shareholders. https://slate.com/business/2013/04/amazon-as-corporate-charity-jeff-bezos-says-there-s-a-method-to-the-madness.html https://slate.com/business/2013/04/amazon-as-corporate-chari...
  - specialist 6y ago
    WalMart steals from suppliers, governments, and employees. eBay & Alibaba learned to steal from customers (fraud, counterfeits). Amazon also stole from investors. Like many before and since. Bezos' single core innovation was somehow persuading Wall Street to go along with the scheme. He never tried to hide or obfuscate the plan. Amazingly, uniquely, that gamble paid off.
xyzelement 6y ago
Interviewed with Amazon's ad product org a few months ago (ultimately both decided it didn't make sense at the time.) Amazon is crushing it with ads and will do even better over time. The main value of ads is to steer shopping dollars towards a better product for the customer. EG: I was about to buy product X but an ad taught me that product Y is better (or just as good, but cheaper.) Amazon is already the best place for this kind of advertising because people are on the site 100% of the time in shopping (or at least product research) mode. Such ads are WAY more valuable than showing me ads when I am trying to read the news or some other non-shopping activity (although amazon is in that business as well.) Over time, Amazon is becoming more and more the start of people's product search. That means Google neither learns about the customer's interest nor earn the ad revenue from (most likely) sending the shopper to Amazon, which makes Amazon's ads even more valuable in comparison. I have no idea HOW valuable the business is but - very.
- creato 6y ago
  Maybe this is working for the masses but I HATE searching for things to buy on Amazon. Last time I tried, the results pages are overwhelmed with sometimes literally hundreds of the exact same product sold by gibberish seller names. Ratings were obviously useless (the same product will have thousands of 5 star reviews by one seller, 10s of more mixed reviews on others). Maybe it's better now but I can't remember the last time I tried to find something on Amazon because of this.
  - joosters 6y ago
    Amazon’s search is terrible. If you sort by price, then the top pages of results are almost always complete garbage items that are completely unrelated to what you are looking for, no matter how specific you are. Almost like Amazon don’t want you to find the cheapest items...
    - cycomanic 6y ago
      So much this. Its actually amazing how it can be this bad. It also is a good example how you don't have to make a good product to rise to the top.
princevegeta89 6y ago
I worked in the ads org at Amazon an year ago and yes I can tell you the revenue generated by ad products across their services is insane. It's a well executed operation and it is only growing rapidly year over year. From a customer perspective they are also very relevant most of the time. The remaining part is making sure they don't upset customers way too much since that would conflict with the idea of "customer satisfaction" the company has.
- bigiain 6y ago
  > From a customer perspective they are also very relevant most of the time. I wonder just how that is measured, and how much of a bullshit metric only calculated and reported on to get someone promoted? I’ve managed to get myself into the “buys webcams” demographic, but buying a webcam. I now suspect all the pointless webcam ads Amazon send me are all highly ranked for “relevance”, even though it’ll probably be 5 years before I buy another one...
  - princevegeta89 6y ago
    Doesn't matter if it's going to be 5 years, they still know what you might be interested in. To a lot of people it is much shorter than 5 years.
- Griffinsauce 6y ago
  It's sad how "We aim to be Earth’s most customer centric company." turns into "not conflicting too much" real quickly when there's money on the table.
  - AniseAbyss 6y ago
    The reason why webshops got big isn't because they have better customer service but because they are cheap. With online shopping it always ends in a race to the bottom.
  - Cederfjard 6y ago
    Surely "we aim to be Earth’s most customer centric company" is still a means to the end which is money, not some altruistic goal?
millstone 6y ago
Amazon ads are contrary to the company's mission statement of being the "most customer centric company." They could improve the customer experience at one stroke by eliminating pay-for-placement.
- lightbendover 6y ago
  It is more complicated than that. Advertisers are customers too and advertising creates incentive to use Amazon and enter into larger deals with Amazon that ultimately lower prices for customers. Additionally, revenue from advertising can go directly into funding supply chain innovations that result in an even better customer experience. Amazon doesn’t typically do anything unless the total downstream impact is shown to be positive; while customers do get annoyed with ads, they appreciate the nice things ad presence provides for them to a greater extent on average.
adventured 6y ago
> This week the FT reported the EU is having trouble building a competition case against Amazon: its theory is that Amazon unfairly steers customers away from Marketplace vendors towards its own products, but one of Amazon’s arguments is apparently that Marketplace is more profitable, so its incentive is the opposite! It's the Alibaba'ification of Amazon. The ideal - if you're Amazon - is to end up as a floating brand that owns a giant billboard mall platform. You want to leave the sellers to deal with most of the problem of not having any margin, as is typical in retail; with Amazon then having ~70% margins on advertising on their platform. And if you're going to bother with traditional retailing, push upstream to owned-brands, which gives you better margins, which is what their Amazon brand build-out is all about. I'm surprised Shopify hasn't (seemingly) figured out this is the direction they have to go, full stop, if they want to keep that comical market cap from collapsing whenever sanity returns to the stock market. Scraping by on very weak margins a few pennies per transaction along with modest subscription fees isn't going to cut it (their operating income margin on trailing four quarters of $2.9b in sales was a horrific 3%). I'd bet on Shopify trying to aggressively leverage their position in tandem with advertising to try to create a fountain of cash. When they inevitably do it, turn to the dark side, it'll gradually make Shopify into a terrible platform.
- berkes 6y ago
  So the counterargument would be that shopify realizes it will become a horrible platform if it moves towards the 'higher margin markets'. And therefore doesn't. Maybe they are looking at the long term. I doubt it, and even if they do so today, tomorrows VC or hedgefund may change this. Still. It is not unthinkable.
  - adventured 6y ago
    I think it's definitely a nice thought, that they'd choose that path, even as their growth slows and shareholders get irate as their market cap implodes (it's impossible to support a $129 billion market cap with their existing business model, they'll be lucky to support 1/3 or 1/4 that). Canada always has an outsized bubble stock with each great bubble; for the dotcom bubble it was Nortel; for the real-estate bubble era it was BlackBerry/RIM; for this one, it's Shopify. My brain wants to think: hey, the Canadian market might be different, they'll act different. And that sounds great, except by the time this is a critical issue (by the time their current business model runs out of its high growth), there will be immense outside influence over the company and the inside owners and their control will have eroded. As that market cap plunges toward a more realistic fair value and growth slows, the calls for change will be extremely loud. They probably have no choice in the end, they'll need to maximize their position at the center of all of those stores, as the platform so many stores depend on, and that will mean forcing an ad network at the center of it all that they try to milk for margin. And in terms of supporting that silly bubble market cap, when Amazon was worth just a bit more than Shopify is today, back in mid 2014 (when interest rates were sitting at 0% also), they had ~$80 billion in sales, 27 times larger than Shopify is today. Shopify is either going to crash, go sideways for many years, or they better find billions in profit asap.
Supermancho 6y ago
> Does Amazon make more from ads than AWS? I didn't need to read the article to know. No, Ads don't make more than AWS. Adspend has been utterly gutted since the early 00's as analytics have shown how ineffective it is. There's still very large companies that uses a nonsense correlated-purchase-after-seeing-an-ad attribution model. This is fantasy to justify existing jobs and to tell other big companies how amazing they are. Digital ads are not going to "take off" anytime soon either, as the hyper-concentration of capital makes spends more regular and "chunky" (block of 5mil spend to each target platform from the big boys, to the big boys) which hasn't even kept up with inflation. A bearish stance when factoring in population growth slowing and political pushback/infighting/adblocking, is pretty reasonable.
- capableweb 6y ago
  Eh, you might not want to confess that you haven't read the article before arguing against it, that's pretty bad form. Why don't you read it and argue against the arguments laid out in the article instead, so the rest of us might learn something instead of reading empty opinions from someone who doesn't even listen to others?
  - Supermancho 6y ago
    Ofc I read it, but the "article" barely manages to make a point with hyperthin facts (AMZ disclosures). The Benedict Evans chart (Amazon: more profit than AWS?) answers concisely, making the "discussion" rather pointless. > However, we can make an informed guess. Google’s core business had 2020 operating margins > To repeat - this is just an informed guess, and ads will of course change other things Lots of handwaving to support a strange theory for no apparent reason other than to portray Amazon as evolving into the same business as Google (a pretty face on an Ad business) for a greater narrative. This feels like establishing facts, with a weak foundation, to reference in the future. OFC this kind of information has been talked about before: https://marketingland.com/analysts-say-amazons-advertising-business-will-surpass-aws-by-2021-245983 https://marketingland.com/analysts-say-amazons-advertising-b... and now Amazon has figured out how to maximize by focusing on other "big brand" items, rather than the ever pitiful mom-and-pop (https://www.innovell.com/it-is-just-amazon-advertising-but-what-is-amg-aap-and-ams/ https://www.innovell.com/it-is-just-amazon-advertising-but-w... - all sponsored focused) but the market is only so big (eyeballs). If AMZ is only 10% of retail, it doesn't make sense to have the same spend as on Google or other retail-focused (Target, Walmart, BestBuy, etc). I just don't see how this made a good case.

334 points by prostoalex 6y ago

Are we talking about ads on the Amazon app/site for products on the Amazon store? Or ads on other sites on the internet for Amazon products?

lightbendover 6y ago
Ad revenue that Amazon receives as a publisher, which comes from a diverse set of ad products served both on Amazon-owned sites and externally via their DSP.
- tpmx 6y ago
  So basically they have figured out a way to keep a larger part of the pie from e.g. those randomly named PRC sellers? I may be slow here, but couldn't they just instead have raised the percentage they charge for sales? (Are those "external sales" really that large?)
  - Spooky23 6y ago
    My guess is that it’s a tax scheme. They probably run everything through different subsidiaries in different jurisdictions and make the capital intensive retail business as bad as possible, and shift losses or depreciation around to write down any earnings in the US or Europe. If the commerce division owes a big commission to Amazon Isle of Man, LLC, they “lose money”.
  - colinmhayes 6y ago
    They lure in 3rd parties to the marketplace with relatively low fees before the third parties realize no one sees their product unless they buy ads. By that point amazon has a bundle of their merchandise and a relationship so instead of pulling out they just buy the ads.
    - AussieWog93 6y ago
      That's not really 100% true. I sell a single product on Amazon (USB oscilloscope I designed a couple of years back), and have no discovery issues at all. It's the top product when you search for "USB Oscilloscope", and on the front page if you just search "Oscilloscope". I don't pay a cent in ads. That said, I did notice a huge rankings boost when signing up for FBA (as opposed to shipping the goods from overseas).
      - tomcam 6y ago
        EspoTek? Because Siglent comes up first in AMZ organic searches for me. Not trying to bust your chops, just interested in this field.
        AussieWog93 6y ago
        Yeah, EspoTek. Interesting to hear that from you - Siglent appears third for me, and that's using an incognito window too (so it would be safe to assume any personalisation is off?).
        jefftk 6y ago
        > so it would be safe to assume any personalisation is off? Depends on whether Amazon is using fingerprinting to target ads
        vidarh 6y ago
        You come first of the organic results for me on amazon.com (with an "Amazon's choice" label), but is nowhere to be seen on amazon.co.uk
        adventured 6y ago
        Just for a data point, in a private tab, when I search Amazon for "USB Oscilloscope" my first three results in order are: EspoTek, Hantek, and then Siglent. It lists EspoTek as "Amazon's Choice". Same results as when I'm signed in. I'm in the US.
ehsankia 6y ago
This is basically Amazon getting sellers on its site to pay money to be ranked higher in search results, and since result ranking is so competitive, companies basically are forced to buy out the keywords for their own products/brand name to avoid other competitors outbidding them. Sometimes, searching stuff like "Dyson" or "Roomba" will give me results from cheap knockoffs before the actual brand I'm even looking for.

deleted 6y ago

[deleted]

einpoklum 6y ago

I've already heard it said that if you have the notion that Amazon is not competing with your business then you've probably just not been following its activities lately.

judge2020 6y ago
Just to name a few, Amazon is not competing with: banks, cars (rivian is _an investment_, it's not owned by AMZN), almost all direct manufacturing eg. semiconductors or displays, apartments.com, vacation planning, etc.
- NicoJuicy 6y ago
  Almost none of those are on amazons e-commerce platform either
  - judge2020 6y ago
    Given > if you have the notion that Amazon is not competing with your business you would think OP is talking about industries in general, much like how AMZN is moving into a bunch of other industries like online payment processing (Amazon Pay), grocery (Whole Foods, Amazon GO), etc. They certainly aren't moving into every industry, probably because these industries already are low-margin or don't have a clear path to growth under Amazon disruption.
- deleted 6y ago
  [deleted]
- 3np 6y ago
  Your point stands, but they arguably do compete with banks through their credit cards/financing. Not sure how it looks in other countries but here in Japan it’s not insignificant. Right now they do it through a JV or sth with SMBC but surely it’s just a matter of time until they get serious there.
- dekervin 6y ago
  I woud not put cars past them. One profitable area that will experience the autonomous driving revolution is logistics.

ChuckMcM 6y ago

This is a good read. For a long time I explained to people that the value of search advertising was that it matched a buyer who had just asked a buying question with advertisers who wanted to answer that question. This was HUGELY different than previous Internet "banner" advertising. Think of it this way; I put a poster up in the metro that says "Best Deals on Rolex watches" and a million people a day "see it" but a vanishingly small number want to buy a Rolex. However, if Google gets a query "Where to buy a Rolex" or "best deals on Rolex watches", well you know that person is perhaps already considering buying a watch, so you want first crack at the deal. The secret sauce was instantly pairing "commercial intent" (or the intention to do some commercial action, buy, sell, hire, Etc.) with vendors and firms who can satisfy that intent or "aspects" of that intent. (You might get an Uber ad on a query for "restaurants near me" for example) Amazon has that in spades. If you are on the Amazon site, that is a huge signal that you are intending to make a commercial transaction. Either with Amazon, or perhaps you are reading reviews of things you can get locally, but the probability that you are about to do something commercial is much much higher. (So does Facebook along a different vector but that is a different post for a different time.) I know from experience at Blekko that one way to piss off Amazon is to out advertise them :-). That just told me that they considered Ads strategic and selling stuff was secondary to that goal[1]. [1] I reasoned it this way, if selling stuff was primary then any additional exposure is "good" even if you have to pay affiliate fees for it. If advertising was the money maker, then someone doing it better than you (converting your ad revenue into their affiliate revenue) then you respond harshly to that.

gundmc 6y ago
Google and Facebook are going to get screwed. They'll get hit by antitrust action (even if just more fines and settlements) while also under the radar losing market share to Amazon via market forces, which ironically is an argument against taking antitrust action against the formers.
tyingq 6y ago
The pricing for the click might kill off any benefit over less targeted advertising though. I poked around in keyword planner, and one click for some rolex related phrases costs $3-$10. I imagine you would have to do quite a lot of expensive experimentation to figure out how to make that profitable.

wmf 6y ago

It's pretty depressing that the worst parts of Amazon (the shady marketplace and ads that don't look like ads) might be the most profitable because it means they won't be reformed or eliminated.

williesleg 6y ago

They make more from taking advantage of everyone and everything.

cm2012 6y ago

Amazon makes more revenue from ads than Youtube does (and Youtube makes 100x what Reddit does). That's nuts. Chart of each ad/marketing channel by spend for context: https://www.rightpercent.com/b2b-guides/which-marketing-channels-are-best-to-grow-your-business-2020-update https://www.rightpercent.com/b2b-guides/which-marketing-chan...

ohashi 6y ago
When I am already on a marketplace trying to buy something, the intent value and timing of it makes it infinitely worth more than random videos, at best re-targetted because i previously visited something.
judge2020 6y ago
Makes sense given Amazon visitors are already pre-disposed to purchase something while the vast majority of YT viewers aren't.
deleted 6y ago
[deleted]
Supermancho 6y ago
RightPercent: B2B AGENCY FOR FACEBOOK AND GOOGLE I'm not sure what data that shows, but I'm confident it's not showing anything but the "public data"...which is a simple excel spreadsheet, hosted on Google by "someone". If you search for the doc id (16HWY3ytQY0kMEFCoJKAwkjO2dr6x0-Nm146-taLpf7A) it's a couple RightPercent posts...probably because they pulled it out of their ass for their own sales pitch.
IPTN 6y ago
I understand this is probably against HN[PolicyNo], but I just came across your comment in another thread that is locked from being ?too old?. It was the Google FloC Post where you stated you wouldn't work on gambling or alcohol ads. This is an area that I recently had to personally struggle with my own personal morals. I wasn't working in ads specifically but marketing. I guess I just wondered if you would be willing to share any thoughts you have on how you find that line of what is acceptable regarding feeling ok to work on something or walk away. Specifically my dilemma is less that about caring about what someone's vice might be (it's not up to me to moralize or decide for people what is 'good'/'bad') but more so that in my opinion we as a humans can be exploited through *technically sophisticated* approaches no matter how much we each think we are immune to that kind of influence; so under that premise, how do I know when some proposal is evil or at least I won't feel good about it when delivered.

mensetmanusman 6y ago

I noticed that almost the entire front page of results now on Amazon are sponsored results. It’s winner winner take all, all the way down.

Zenst 6y ago
Yip they have their hands in all the pies with the exception of bank accounts, though with Amazon gift cards almost treated as currency - they are not far from that already.

mountainb 6y ago

It's because Amazon's ad platform has been the best ecommerce ad platform for the narrow and profitable purpose of direct sales basically since the day that it launched. Google let Amazon take a giant bite out of Shopping because it was complacent with its also profitable business model of absorbing giant corporate black hole ad budgets and earning multi-hundred dollar clicks off of people like personal injury lawyers.

ramraj07 6y ago
I just went through a rabbit hole of sites about adwords for injury lawyers and my mind is blown by how obvious and expected it is but it’s still insane to think of a single click being billed 200$. But it makes perfect sense, adwords is far more suited to for this purpose and it’s one case of everyone getting what they want (except the dude getting sued) so why not? Google is getting healthy competition in the ad space so within that dimension it’s great? If we now just ensure the Amazon workers can unionise and put amazons more physical manifestations on check then this is a better situation overall than whatever we have now.
- gscott 6y ago
  I run a commercial insurance campaign with clicks from $25 to $45 each but it works and provides the whole company with enough leads the renew the next year to make it worth it but it costs $120k+ a year. Google has figured out how to make the organic list as irrelevant as possible.

JumpCrisscross 6y ago

> it doesn’t make money, it sells below cost, it’s subsidised by investors and in particular it’s subsidised by AWS Who makes this claim? It’s idiotic on its face, and disproven by their filings.

danielmarkbruce 6y ago
Whether it's right on wrong, it's not disproven by their filings, at least going back a few years. For a very long time Amazon was running at break even or thereabouts. Additionally, while the argument that Amazon had some very profitable lines of business seemed reasonable, it was never clear that Amazon could just choose the profitable ones and leave the losing ones. Loss leaders is a thing. AWS has subsequently made Amazon look amazing and they are obviously worth an ungodly sum of money, but if it weren't for AWS it would still be unclear how good of a business Amazon really is. Even ads isn't a business they get to be in for free. They couldn't just shut down Amazon's direct lines and be all ads + marketplace.
chx 6y ago
> Who makes this claim? Matthew Yglesias did in 2013. https://slate.com/business/2013/01/amazon-q4-profits-fall-45-percent.html https://slate.com/business/2013/01/amazon-q4-profits-fall-45... > That’s because Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. And while it was a good quip it might not have became so famous if Bezos didn't quote him unattributed a few months later in a letter to shareholders. https://slate.com/business/2013/04/amazon-as-corporate-charity-jeff-bezos-says-there-s-a-method-to-the-madness.html https://slate.com/business/2013/04/amazon-as-corporate-chari...
- specialist 6y ago
  WalMart steals from suppliers, governments, and employees. eBay & Alibaba learned to steal from customers (fraud, counterfeits). Amazon also stole from investors. Like many before and since. Bezos' single core innovation was somehow persuading Wall Street to go along with the scheme. He never tried to hide or obfuscate the plan. Amazingly, uniquely, that gamble paid off.

xyzelement 6y ago

Interviewed with Amazon's ad product org a few months ago (ultimately both decided it didn't make sense at the time.) Amazon is crushing it with ads and will do even better over time. The main value of ads is to steer shopping dollars towards a better product for the customer. EG: I was about to buy product X but an ad taught me that product Y is better (or just as good, but cheaper.) Amazon is already the best place for this kind of advertising because people are on the site 100% of the time in shopping (or at least product research) mode. Such ads are WAY more valuable than showing me ads when I am trying to read the news or some other non-shopping activity (although amazon is in that business as well.) Over time, Amazon is becoming more and more the start of people's product search. That means Google neither learns about the customer's interest nor earn the ad revenue from (most likely) sending the shopper to Amazon, which makes Amazon's ads even more valuable in comparison. I have no idea HOW valuable the business is but - very.

creato 6y ago
Maybe this is working for the masses but I HATE searching for things to buy on Amazon. Last time I tried, the results pages are overwhelmed with sometimes literally hundreds of the exact same product sold by gibberish seller names. Ratings were obviously useless (the same product will have thousands of 5 star reviews by one seller, 10s of more mixed reviews on others). Maybe it's better now but I can't remember the last time I tried to find something on Amazon because of this.
- joosters 6y ago
  Amazon’s search is terrible. If you sort by price, then the top pages of results are almost always complete garbage items that are completely unrelated to what you are looking for, no matter how specific you are. Almost like Amazon don’t want you to find the cheapest items...
  - cycomanic 6y ago
    So much this. Its actually amazing how it can be this bad. It also is a good example how you don't have to make a good product to rise to the top.

princevegeta89 6y ago

I worked in the ads org at Amazon an year ago and yes I can tell you the revenue generated by ad products across their services is insane. It's a well executed operation and it is only growing rapidly year over year. From a customer perspective they are also very relevant most of the time. The remaining part is making sure they don't upset customers way too much since that would conflict with the idea of "customer satisfaction" the company has.

bigiain 6y ago
> From a customer perspective they are also very relevant most of the time. I wonder just how that is measured, and how much of a bullshit metric only calculated and reported on to get someone promoted? I’ve managed to get myself into the “buys webcams” demographic, but buying a webcam. I now suspect all the pointless webcam ads Amazon send me are all highly ranked for “relevance”, even though it’ll probably be 5 years before I buy another one...
- princevegeta89 6y ago
  Doesn't matter if it's going to be 5 years, they still know what you might be interested in. To a lot of people it is much shorter than 5 years.
Griffinsauce 6y ago
It's sad how "We aim to be Earth’s most customer centric company." turns into "not conflicting too much" real quickly when there's money on the table.
- AniseAbyss 6y ago
  The reason why webshops got big isn't because they have better customer service but because they are cheap. With online shopping it always ends in a race to the bottom.
- Cederfjard 6y ago
  Surely "we aim to be Earth’s most customer centric company" is still a means to the end which is money, not some altruistic goal?

millstone 6y ago

Amazon ads are contrary to the company's mission statement of being the "most customer centric company." They could improve the customer experience at one stroke by eliminating pay-for-placement.

lightbendover 6y ago
It is more complicated than that. Advertisers are customers too and advertising creates incentive to use Amazon and enter into larger deals with Amazon that ultimately lower prices for customers. Additionally, revenue from advertising can go directly into funding supply chain innovations that result in an even better customer experience. Amazon doesn’t typically do anything unless the total downstream impact is shown to be positive; while customers do get annoyed with ads, they appreciate the nice things ad presence provides for them to a greater extent on average.

adventured 6y ago

> This week the FT reported the EU is having trouble building a competition case against Amazon: its theory is that Amazon unfairly steers customers away from Marketplace vendors towards its own products, but one of Amazon’s arguments is apparently that Marketplace is more profitable, so its incentive is the opposite! It's the Alibaba'ification of Amazon. The ideal - if you're Amazon - is to end up as a floating brand that owns a giant billboard mall platform. You want to leave the sellers to deal with most of the problem of not having any margin, as is typical in retail; with Amazon then having ~70% margins on advertising on their platform. And if you're going to bother with traditional retailing, push upstream to owned-brands, which gives you better margins, which is what their Amazon brand build-out is all about. I'm surprised Shopify hasn't (seemingly) figured out this is the direction they have to go, full stop, if they want to keep that comical market cap from collapsing whenever sanity returns to the stock market. Scraping by on very weak margins a few pennies per transaction along with modest subscription fees isn't going to cut it (their operating income margin on trailing four quarters of $2.9b in sales was a horrific 3%). I'd bet on Shopify trying to aggressively leverage their position in tandem with advertising to try to create a fountain of cash. When they inevitably do it, turn to the dark side, it'll gradually make Shopify into a terrible platform.

berkes 6y ago
So the counterargument would be that shopify realizes it will become a horrible platform if it moves towards the 'higher margin markets'. And therefore doesn't. Maybe they are looking at the long term. I doubt it, and even if they do so today, tomorrows VC or hedgefund may change this. Still. It is not unthinkable.
- adventured 6y ago
  I think it's definitely a nice thought, that they'd choose that path, even as their growth slows and shareholders get irate as their market cap implodes (it's impossible to support a $129 billion market cap with their existing business model, they'll be lucky to support 1/3 or 1/4 that). Canada always has an outsized bubble stock with each great bubble; for the dotcom bubble it was Nortel; for the real-estate bubble era it was BlackBerry/RIM; for this one, it's Shopify. My brain wants to think: hey, the Canadian market might be different, they'll act different. And that sounds great, except by the time this is a critical issue (by the time their current business model runs out of its high growth), there will be immense outside influence over the company and the inside owners and their control will have eroded. As that market cap plunges toward a more realistic fair value and growth slows, the calls for change will be extremely loud. They probably have no choice in the end, they'll need to maximize their position at the center of all of those stores, as the platform so many stores depend on, and that will mean forcing an ad network at the center of it all that they try to milk for margin. And in terms of supporting that silly bubble market cap, when Amazon was worth just a bit more than Shopify is today, back in mid 2014 (when interest rates were sitting at 0% also), they had ~$80 billion in sales, 27 times larger than Shopify is today. Shopify is either going to crash, go sideways for many years, or they better find billions in profit asap.

Supermancho 6y ago

> Does Amazon make more from ads than AWS? I didn't need to read the article to know. No, Ads don't make more than AWS. Adspend has been utterly gutted since the early 00's as analytics have shown how ineffective it is. There's still very large companies that uses a nonsense correlated-purchase-after-seeing-an-ad attribution model. This is fantasy to justify existing jobs and to tell other big companies how amazing they are. Digital ads are not going to "take off" anytime soon either, as the hyper-concentration of capital makes spends more regular and "chunky" (block of 5mil spend to each target platform from the big boys, to the big boys) which hasn't even kept up with inflation. A bearish stance when factoring in population growth slowing and political pushback/infighting/adblocking, is pretty reasonable.

capableweb 6y ago
Eh, you might not want to confess that you haven't read the article before arguing against it, that's pretty bad form. Why don't you read it and argue against the arguments laid out in the article instead, so the rest of us might learn something instead of reading empty opinions from someone who doesn't even listen to others?
- Supermancho 6y ago
  Ofc I read it, but the "article" barely manages to make a point with hyperthin facts (AMZ disclosures). The Benedict Evans chart (Amazon: more profit than AWS?) answers concisely, making the "discussion" rather pointless. > However, we can make an informed guess. Google’s core business had 2020 operating margins > To repeat - this is just an informed guess, and ads will of course change other things Lots of handwaving to support a strange theory for no apparent reason other than to portray Amazon as evolving into the same business as Google (a pretty face on an Ad business) for a greater narrative. This feels like establishing facts, with a weak foundation, to reference in the future. OFC this kind of information has been talked about before: https://marketingland.com/analysts-say-amazons-advertising-business-will-surpass-aws-by-2021-245983 https://marketingland.com/analysts-say-amazons-advertising-b... and now Amazon has figured out how to maximize by focusing on other "big brand" items, rather than the ever pitiful mom-and-pop (https://www.innovell.com/it-is-just-amazon-advertising-but-what-is-amg-aap-and-ams/ https://www.innovell.com/it-is-just-amazon-advertising-but-w... - all sponsored focused) but the market is only so big (eyeballs). If AMZ is only 10% of retail, it doesn't make sense to have the same spend as on Google or other retail-focused (Target, Walmart, BestBuy, etc). I just don't see how this made a good case.