Google knows what people are searching for. Facebook knows what people like and who their friends are. Amazon knows you searched last week for running shoes, but also that you bought a pair a year ago. That kind of information makes a difference, especially for third party advertisers....
How it works
After running ads on its own website for years, the company has taken the first steps toward becoming a true Internet advertising network, using the knowledge garnered from its data to place targeted ads for some of the world's biggest advertisers across thousands of other websites. It buys ad inventory - or online ad space - from content publishers or through exchanges, which are online markets for buying and selling inventory.
Amazon quietly started serving ads on other websites in the fourth quarter of 2010. This part of its business remained un-named until about the middle of last year, when the company formally christened it the Amazon Advertising Platform.
Another $1bn revenue stream for Amazon?
Numberswise, online advertising has 20 to 30 percent profit margins versus less than 5 percent for Amazon's retail business, according to Ben Schachter, an analyst at Macquarie. Moreover, with predictions that Amazon's ad business will hit $1 billion in sales this year, the attractions are obvious. "Amazon is not a retailer anymore, it is the largest behavioural marketing company in the world," said Yaakov Kimelfeld, chief research officer at Kantar Media Compete. "Amazon will be the best positioned to predict whether to buy inventory or not and be the most efficient in this market."
A step closer to 'permission marketing'?
The real potential for advertisers lies in the fact that regular users do not regard 'Amazon' advertising as an intrusion, given the precision of its targeting... It therefore fits well with Godin's philosophy that marketers should obtain permission before advancing to the next step in the purchasing process, in contrast with the 'interruption-marketing' of traditional media. Amazon's approach can be a step forward for advertisers wishing to open a willing dialogue with consumers that want to buy..
The 'superfluous 50%' of advertising....
The Amazon move does not bode well for traditional media. If we take the old advertising maxim: '50% of my advertising is wasted, trouble is, I don't know which half...' literally, it means that advertising impact can be achieved with 50% of the spend, if the waste can be avoided. As a result, the precise targeting based on the Amazon model will mean a significant reduction in advertising expenditure, even if the reduced budgets go to traditional media. However, if speed and flexibility becomes a requirement in optimising real-time purchasing data, then traditional media may again be found wanting... With the reduction in its advertising 'lifeblood', traditional media may have to resort to the 'cover-price' to restore viability, or make a fundamental 'e-assessment' of their ability to meet real consumer need......
The amazonian-advantages for advertisers should go without saying.....
How it works
After running ads on its own website for years, the company has taken the first steps toward becoming a true Internet advertising network, using the knowledge garnered from its data to place targeted ads for some of the world's biggest advertisers across thousands of other websites. It buys ad inventory - or online ad space - from content publishers or through exchanges, which are online markets for buying and selling inventory.
Amazon quietly started serving ads on other websites in the fourth quarter of 2010. This part of its business remained un-named until about the middle of last year, when the company formally christened it the Amazon Advertising Platform.
Another $1bn revenue stream for Amazon?
Numberswise, online advertising has 20 to 30 percent profit margins versus less than 5 percent for Amazon's retail business, according to Ben Schachter, an analyst at Macquarie. Moreover, with predictions that Amazon's ad business will hit $1 billion in sales this year, the attractions are obvious. "Amazon is not a retailer anymore, it is the largest behavioural marketing company in the world," said Yaakov Kimelfeld, chief research officer at Kantar Media Compete. "Amazon will be the best positioned to predict whether to buy inventory or not and be the most efficient in this market."
A step closer to 'permission marketing'?
The real potential for advertisers lies in the fact that regular users do not regard 'Amazon' advertising as an intrusion, given the precision of its targeting... It therefore fits well with Godin's philosophy that marketers should obtain permission before advancing to the next step in the purchasing process, in contrast with the 'interruption-marketing' of traditional media. Amazon's approach can be a step forward for advertisers wishing to open a willing dialogue with consumers that want to buy..
The 'superfluous 50%' of advertising....
The Amazon move does not bode well for traditional media. If we take the old advertising maxim: '50% of my advertising is wasted, trouble is, I don't know which half...' literally, it means that advertising impact can be achieved with 50% of the spend, if the waste can be avoided. As a result, the precise targeting based on the Amazon model will mean a significant reduction in advertising expenditure, even if the reduced budgets go to traditional media. However, if speed and flexibility becomes a requirement in optimising real-time purchasing data, then traditional media may again be found wanting... With the reduction in its advertising 'lifeblood', traditional media may have to resort to the 'cover-price' to restore viability, or make a fundamental 'e-assessment' of their ability to meet real consumer need......
The amazonian-advantages for advertisers should go without saying.....
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