How Amazon is Expanding its Ad Department

Have you ever found yourself searching for something online, and then being inundated with ads for similar products for the next few days whenever you go online? The future of advertising is online—specifically, targeted advertising.

If you were to think of the biggest ad platforms in the world, which would you think of? Likely, Google and Facebook would make the list—and rightly so, they are number one and two respectively. But who’s ranked third?

You might be surprised to learn the answer is Amazon. That’s right, the global shopping giant is also the third-biggest ad platform out there.

With the rise in popularity of online shopping, it makes sense that Amazon would be interested in getting into the advertising business. Consider this, they already know what you’re buying and when you’re buying it, information that can be immensely valuable to advertisers.

This past year, Amazon brought in nearly $3 billion—$2.72 billion, to be specific—through their advertising department.

Prioritizing Advertising

This past September, Amazon merged several of its affiliates including Amazon Media Group, Amazon Marketing Services, and Amazon Advertising Platform, and formed Amazon Advertising.

According to Paul Kotas, the man in charge of the division, the move was intended to simplify the process for the myriad of companies who currently use or plan on using their advertising services in the future.

Sponsored Ads

If you’ve ever searched for something on Amazon, you’ve probably noticed product near the top of the page with the words “sponsored” next to them. These are targeted ads based on the keywords from your search; they allow advertisers to promote certain products.

Advertisers bid on specific key search terms, and the ads with the highest bids are more likely to appear (similar to Google’s ad structure), then, advertisers pay a certain amount per click their ad receives. They can also set a predetermined maximum amount they want to pay.

The ads can then show up anywhere in the search results, which often means you have to scroll through sponsored products before you can find what you’re looking for.

This is also why, if you search for a specific brand, you might see results from other brands as well. Advertisers bidding on rival companies search terms is called “conquesting” and allows them to have ads for their products show up when people reach for the products of their rival companies (for example, Nike could bid on Adidas keyword searches in order to ensure their product also appears in people’s searches for related products.).

Display Ads

In addition to product advertising, Amazon also sells display ads which allow businesses that don’t have the capacity to sell products on Amazon to benefit from their advertising services.

For example, a small business owner looking to advertise their services could buy ad space on pages advertising products related to the services their business offers. (such as a car mechanic advertising their company on searches for tires and auto parts).