The world’s largest online retailer is now positioned to expand its advertising services. MIT Technology Review reports that after relying on third-party technology and ad exchanges over the past year, Amazon has developed its own in-house advertising platform.
Amazon has an unrivaled bank of data on online consumer purchasing behavior that it can mine from its 152 million customer accounts. The company knows what millions of people actually buy or are intending to buy and it can now give salivating advertisers a way to target ads based on that data. While Amazon has not commented, the MIT article suggests that the company would not give advertisers direct access to the data due to its own privacy policies and a desire to keep the data proprietary. Instead Amazon will create target audiences based on customer purchasing habits. For example, a marketer selling digital camera accessories could bid to show ads to a target audience of digital camera buyers.
Up to now advertising has been a relatively small part of Amazon’s business. It brought in about $500 million of Amazon’s $48 billion in revenue in 2011 according to Baird & Co. Both Amazon Product Ads and the newer Sponsored Ads program that rolled out last spring run on Amazon’s own sites. An ad network that reaches across sites could open much larger revenue streams for the company.
The question the MIT article raises is if Amazon is planning to expand its advertising business and compete more directly with Google and Facebook. Or whether the company is primarily concerned with retailers like Walmart and plans to use the ad network to support the sellers on its own sites. Advertisers will be watching.