[HN Gopher] Does Amazon make more from ads than AWS?
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Does Amazon make more from ads than AWS?
Author : prostoalex
Score : 319 points
Date : 2021-03-26 15:25 UTC (2 days ago)
(HTM) web link (www.ben-evans.com)
(TXT) w3m dump (www.ben-evans.com)
| einpoklum wrote:
| 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 wrote:
| 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.
| dekervin wrote:
| I woud not put cars past them. One profitable area that will
| experience the autonomous driving revolution is logistics.
| AlotOfReading wrote:
| They're at least partially in most of those markets.
|
| Banks: Amazon Lending
|
| Cars: Zoox
|
| Semiconductors: Annapurna Labs on the design side. They
| aren't entering the fab side, but who is anymore?
|
| Vacation planning: They've vaguely entered it a few times,
| but withdrew. They used to offer travel bookings directly on
| Amazon in partnership with Expedia. That disappeared, then
| they made tentative steps towards bookings with Amazon local.
| That's not to mention how they already own a significant
| chunk of the retail side of travel.
| NicoJuicy wrote:
| Almost none of those are on amazons e-commerce platform
| either
| judge2020 wrote:
| 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.
| qeternity wrote:
| I think GP's comment was more of a rule-of-thumb about
| Amazon's breadth.
|
| But the fact that a list of business _not_ engaged in is that
| short, _and_ that a bunch of subsequent comments dispute a
| number of them, is freaking insane.
| [deleted]
| 3np wrote:
| 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.
| millstone wrote:
| 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 wrote:
| 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.
| williesleg wrote:
| They make more from taking advantage of everyone and everything.
| cm2012 wrote:
| 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-chan...
| ohashi wrote:
| 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 wrote:
| Makes sense given Amazon visitors are already pre-disposed to
| purchase something while the vast majority of YT viewers
| aren't.
| [deleted]
| Supermancho wrote:
| 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.
| mensetmanusman wrote:
| 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 wrote:
| 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.
| ChuckMcM wrote:
| 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.
| tyingq wrote:
| 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.
| doopy1 wrote:
| Rolexes sell for five figures. Even if someone has to spend
| $x,xxx on clicks before a single conversion, they are still
| making a killer ROI.
| Nextgrid wrote:
| The question is how many people search for Rolexes vs how
| many people actually end up buying one now (or at the very
| least, later but from the same seller, to offset the ad's
| cost)?
|
| I think that for luxury goods, you can have a lot of people
| (more than for other expensive but otherwise boring goods)
| looking at them (maybe they are curious about the price)
| but very few that would actually follow through with their
| purchase.
| saalweachter wrote:
| One of my favorite anecdotes from my time in comparison
| shopping (where north of 80% of our revenue was CPA deals)
| was looking at the variation of margins by product
| (electronics paid 1%; clothing more like 8-10% as a rev
| share) and seeing one outlier where we were paid a
| commission of 50%.
|
| The product was a fake rolex, as in, the name of the item
| was literally something like "Fake Rolex", and while it was
| only something like $100, instead of $10,000, it was
| apparently still such a high margin that the seller would
| pay us a 50% sales commission.
| moneywoes wrote:
| Sorry what are cpa deals
| benglish11 wrote:
| Cost per acquisition
| saalweachter wrote:
| Versus CPC, where you get paid for anyone clicking
| through, or CPM, where you get paid per thousand views of
| the "ad".
| [deleted]
| emodendroket wrote:
| Clicks show a lot more buying intent than impressions though.
| Might still be OK.
| Macha wrote:
| A theory as to why the ads are so useless to people despite the
| above:
|
| Who has the most to gain from being shown in these advertising
| spots? Those who would not be purchased otherwise. If you are
| the default choice, maybe some amount of people will be swayed
| by the competitors ad, but % wise, not a huge amount.
|
| Who wouldn't be purchased otherwise? Those without recognition
| otherwise. This could be those who are simply too small to be
| known, or those who are "just another no name brand" with
| possibly questionable quality.
|
| Of these two groups, it's the latter who will have more money
| to spend - the "small" sellers by definition don't have the
| marketing budget. So it's those selling crap in volume who have
| both the incentive and the resources to put the most into these
| ads, and why they end up showing up disproportionately among
| the advertisments.
| lifeisstillgood wrote:
| I think the great problem is "commercial intent". I search the
| internet multiple times a day, but I rarely want to actually
| buy something.
|
| Amazon has a win here compared to facebook or Google because if
| I search for something on Amazon it's vastly more likely I am
| buying.
|
| It's the difference between asking a sales assistant "do you
| have good coffee" (amazon), asking a librarian for a book on
| good coffee (google) and asking my friend if they like their
| coffee (facebook). Intent and context matter.
|
| https://news.ycombinator.com/item?id=26535260
| mjevans wrote:
| That, or I'm shopping for someone else to recommend it to
| them.
|
| Where Amazon's got a major problem is that the counterfeits
| and the perception that any negative product experience might
| be the result of that, makes it increasingly less likely that
| I and others, go to Amazon looking for that product.
| lifeisstillgood wrote:
| I have been thinking about why Amazon is pissing in its own
| soup, with counterfeit and other "problematic" goods.
|
| 1. Scale - it's just too hard to curate all those products.
| Meh - Amazon has hired like a billion people, it can hire
| product line owners.
|
| 2. Do you remember in the mid-90s Amazon had some big push
| for sellers to add their SKUs abs descriptions of goods (ie
| instead of Amazon holding a database of goods, and you
| saying "i am selling one of these" you the seller added it
| to amazon marketplace. This was a move to collect all the
| data about all the goods ever.
|
| The current allowance of poor quality goods is I think the
| same game. Most dodgy goods sold are not "dangerous
| counterfeit" - as in selling medicinal drugs made from
| floor sweepings. Most dodgy goods are the things you find
| in Poundland and market stalls. A plastic knock off of
| "Mike-y Mouse" or running tops made from cotton not the
| high tech wick, or often the same goods as branded made on
| same machines, just not branded.
|
| This set of goods is what the next billion consumers will
| buy for two decades. You cannot afford H&M prices but you
| can afford the knock offs pouring out of Chinese and
| Philipino factories - and yet how do you get the catalog
| for those factories?
|
| The same way Amazon did in the 90s.
|
| Anyway ..
| lifeisstillgood wrote:
| I think we need to look at the impact of the recent Apple
| ID and chrome / firefox changes.
|
| If it becomes harder for a the ad network ecosystem to
| track a person across sites, then sites that provide
| commercial intent (amazon) or provide _first party access_
| to self selecting groups (ie car magazines, Wall Street
| Journal articles on cars)
|
| If apple can stop ad networks selling "people who read the
| FT" at half the price that FT charges, then mainstream
| media might be able to claw back what Google and facebook
| took.
| jefftk wrote:
| "Amazon has a win here compared to facebook or amazon"
|
| ?
| lifeisstillgood wrote:
| I meant google - corrected
|
| The basic idea is in the GP - amazon is a shopping site so
| any search there carries a lot of commercial intent. This
| fades (linearly? exponentially?) as we walk down to google
| then facebook.
| maxerickson wrote:
| The most prominent ads I see on Amazon are for the thing I just
| bought, that isn't a kind of thing most people buy repeatedly.
| birdsbirdsbirds wrote:
| My guess is that they make sure that you don't doubt your
| purchase. You could send it back if a competitor gets into
| your head. Additionally, if you don't doubt, you become loyal
| to the brand and you will recommend it in your network.
| serial_dev wrote:
| Well, you might think that. Did you consider that you might
| be wrong and maybe Amazon actually has lot of data that you
| don't and they know it better?
|
| Just a couple of examples.
|
| I might have bought a hard disk drive a couple of days ago
| and realize that I actually want more so I can do backups (or
| I want to build a cute HDD tower with a Raspberry Pi).
|
| I might have bought ear plugs for home, and decide a week
| later that it would be nice to have those at work, too.
|
| I could have bought zip ties, only to realize that I actually
| want more in different sizes and colors.
|
| I bought a pijama, it was delivered and I want to buy 3 more
| of those, so I can throw out my old ugly pijamas and not
| worry about buying new pijamas for the next 5 years.
|
| I got headphones but they aren't quite perfect. I didn't
| issue a refund yet, but I know I'd eventually send them back
| and want to buy a similar headphone asap.
| maxerickson wrote:
| No, I never, ever, consider that I might be wrong about
| anything. Doesn't happen.
| Boxxed wrote:
| Except the same-damn-product ads also come up for things
| that make very little sense for re-purchase: artwork, DVDs,
| books, and so on.
| cthalupa wrote:
| I can envision scenarios where you're buying multiple
| copies of these things - gifts, book clubs, etc.
|
| Advertising doesn't have to work universally - it just
| has to work better than not advertising at all. I could
| very well imagine situations where it is cheap enough to
| advertise to everyone who has purchased those same items
| to get additional sales from those duplicate purchases
| and make money after the advertising spend.
| ehsankia wrote:
| Where do you see those ads?
|
| The most prominent ads I see on amazon is when I search for
| literally anything, the top results are often whoever paid
| Amazon the most to be the top results. Sometimes I will
| literally search for a brand by name and some other brand
| will be shown before it. This kind of race to the bottom is
| something I've heard a lot of companies complain about,
| companies literally need to pay Amazon for the ads on their
| own terms to outbid competitors.
| Jugurtha wrote:
| > _then you respond harshly to that_
|
| How harshly? I've got the popcorn ready...
|
| > _So does Facebook along a different vector but that is a
| different post for a different time._
|
| That was six hours ago. Now is a different time...
| gundmc wrote:
| 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.
| miked85 wrote:
| > _I know from experience at Blekko that one way to piss off
| Amazon is to out advertise them_
|
| It is a shame (at least to me) that Blekko was acquired by IBM
| - it showed a lot of promise and I was a fan at the time.
| elorant wrote:
| Rolex doesn't need to advertise on public spaces. They will
| just sponsor an event that attracts the wealthy, like a sailing
| race or a horse race. Contextual advertising is very powerful,
| and it's the one thing digital networks decided to abandon
| because it's way easier to automate everything and spy on
| users.
| lifeisstillgood wrote:
| It's also worth mentioning that "a buyer who just asked a
| buying question" can be almost entirely met through _contextual
| search_ (no need to track the user, just the question ala
| duckduckgo) - and so you can let go of an awful lot of
| previously held behavioural data (tracking people across
| multiple sites) - partly for privacy but also I have not seen
| any evidence it adds (significant) value
| BoppreH wrote:
| 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.
|
| I've found that my "buying questions" are _never_ properly
| answered by those ads. The more commercial intent I display,
| the scummier the ads get.
|
| I blame misaligned interests: I want to know if the product is
| good and to find good deals, they want me to give them money,
| now! And since advertising is a numbers game, they don't pull
| their punches when manipulating me.
|
| No, thank you. Talk to my adblocker.
| mr_toad wrote:
| > I've found that my "buying questions" are never properly
| answered by those ads. The more commercial intent I display,
| the scummier the ads get.
|
| It's a lot like walking into a car dealership. They aren't
| aiming to match you with the best car for you, they're aiming
| to sell you the car that makes them the most money.
| amelius wrote:
| Modern life is like being in a car dealership 24/7.
| datenhorst wrote:
| That is a sadly apt metaphor
| c_s_guy wrote:
| I've never actually bought straight from a dealership so
| excuse my naivety here, but wouldn't they be better off
| trying to sell me the car that _is_ best for me? Otherwise
| if it doesn 't meet my needs, I won't be buying anything.
| neolog wrote:
| You probably can't tell which car is best for you, and
| salespeople aren't gonna help.
| [deleted]
| Dylan16807 wrote:
| They just have to convince you it's good enough.
|
| Even if they do pick a car largely based on your needs,
| they're never going to say it's anything but a perfect or
| near-perfect fit.
| vidarh wrote:
| What is 'best' is highly subjective and emotive.
|
| At almost any price point there is going to be some model
| or feature that is a bit more expensive that you may not
| strictly need but that may be better in one way or other.
| llarsson wrote:
| They will sell you the car _currently in their lot_ that
| most closely matches what you need. Not what you actually
| need. Just the closest they have.
| pbhjpbhj wrote:
| Doubt. Yes, the one in their lot; no, on best match.
| They'll try and sell to you according to _their_ need -
| highest commission, dump a lemon, etc. If you do choose a
| vehicle they 'll try to give you a terrible finance deal,
| wiggle out of a warranty they were offering, and such.
| zaphirplane wrote:
| Car dealers may not be a frequent repeat customer like
| stores Word of mouth is diluted by type model needs, it's
| not my friend was recommended dealer bar for their
| experience buying a Honda foo I'll go and buy one
| [deleted]
| cycomanic wrote:
| I recommend talking to some people who know about car
| dealer sales strategies. For many people buying a car is
| highly emotional and car dealers are trying to manipulate
| those. Some examples, if you come in with a budget of say
| $5000 they will always try to sell you something which is
| above your budget ("this is what you really want/need"),
| so never give them your true budget. If it comes to
| closing a sales deal they will often work on you with 2
| people, which is much harder to resist psychologically.
| So best is to go buy a car with at least 2 people as well
| (and make a strategy before so they don't play you
| against each other). They also use strategies, like
| installing a mirror at the place where you drop the car
| back after a test drive so you see yourself in the car,
| which causes an emotional response.
| laurent92 wrote:
| ...and this is part of the success of Tesla.
|
| Car dealers are literally driving traffic away from them.
| They are about as popular as taxi drivers before Uber.
|
| Psychological tricks are a predatory social behavior, not
| only to the buyer, but also because people (especially
| introverts) detect them quickly and grow tired very fast.
| That leads people online (for Tesla) or online shopping
| (who enjoys being harassed by vendors in every clothes
| shop?), or online because at least the price negotiation
| doesn't depend on your face or your mastery of social
| games. When your psychological tricks lead to entire
| industries sidestepping you and letting you die with
| popular support, you know something is wrong.
| irrational wrote:
| And yet Saturn failed even though that was how their cars
| were sold also.
| alistairSH wrote:
| All true. And thankfully avoidable in 2021. I just bought
| a new car, from a large chain dealer, 95% by SMS.
| NullPrefix wrote:
| No thanks, delivery would eat all my data allowance.
| sunsipples wrote:
| OTT but in line with your question In my part of
| Australia we have an established dealership who has been
| here since the 70's and I bought my 1st car from him in
| the mid 90's. each couple of years I would go back and
| ask what he could do for me as a trade and on what. every
| time, walking out with a good deal (he actually moved
| figures around to get the best price) larger part of my
| wifes family started going there and same outcome, come
| home with a car they like, met their expectations and got
| good trade-ins for their cars. recently I took mine and
| my wifes cars in to change over, we picked our cars, got
| fair to good trade ins on them, paid and then waited on
| them to be detailed so we could drive home. I asked the
| dealer principle which car would he have sold me if he
| wanted to make money. he said, plainly "they all make
| money, in differing amounts, no point trying for a high
| margin car that won't suit either of your needs" I asked
| what he could of pointed us at if he wanted more money
| out of us. his reply "I'd push you to a cheaper 2nd hand
| car or one of the LDV/MG/Import cars where I would make
| 3x as much as what I am getting from this sale" guy is in
| his 80's and doesn't mince words but is as honest as they
| come
| LeifCarrotson wrote:
| Right? If anything that tells me what vendors spend more on
| ads than on their product; every dollar they spent on this
| annoyingly pervasive ad campaign was a dollar they took from
| buyers but didn't put into the products they're selling.
| cortesoft wrote:
| Yeah, it is annoying when I am searching for a specific
| product and the top ad results are places that don't actually
| sell it. It is one thing to advertise to me the thing I want,
| but don't distract me from what I am trying to do.
| colechristensen wrote:
| My experiences exactly, my ad experiences fit in to two
| categories "things i just purchased" and "terrifically bad
| suggestions". A third category might be "creepy connections"
| where a random search leads to ads on vastly different
| platforms usually quite inappropriately.
| seoaeu wrote:
| Are the "things I just purchased" suggestions actually bad
| though? I see people complain about them a lot, but I
| haven't seen anyone chime in with what the conversion rate
| is on them compared to other targeting strategies. Like I'd
| suspect that having already purchased an item is highly,
| highly correlated with purchasing it again. And that
| probably even applies to things that don't initially seem
| like you'd need more than one of.
| edoceo wrote:
| When I have my ad-blocker off I see a lot of ads for
| Linode, AWS and DO. I already have a relationship with
| each of them.
|
| Amazon still keeps showing me faucet valves and a
| kitchen-sinks. (I did a replacement two years ago).
|
| And, every last ad for any/all PostgreSQL commercial add-
| on.
|
| Some (many) items don't fit the repeat pattern and I'm
| confounded how, with all the Ai/ML crap this isn't known
| yet.
|
| They (ad-sellers) would rather hustle the BS of
| "retargeting"
| vidarh wrote:
| Or it fits better than you think, and/or the margins for
| certain types of products are high enough to justify
| bidding for ads even when they fit only a tiny proportion
| of the time.
|
| E.g. you may have a relationship with Linode, AWS and DO,
| but presumably all three would prefer you ditched one or
| two of the others for more spend with them.
|
| And you may have done a kitchen replacement two years
| ago, but how many percent need to do repairs or changes
| subsequently, or are unhappy about choices they've made,
| and end up spending enough on high margin additional
| products for years to come? That you've proven yourself
| to be willing to invest in improvements recently might
| well make you _more_ profitable to advertise to even
| though you 've already made the biggest investment.
|
| I'm sure many advertisers are bad at targeting, and so
| I'm sure some of these ads are metaphorically burning
| money. But I'm also sure - because I've seen that too -
| that sometimes seemingly totally counter-intuitive ads
| makes sense after all with access to the actual
| underlying numbers.
| oxfordmale wrote:
| Having already purchased an item is indeed highly
| correlated with purchasing it again, however, you are
| ignoring the temporal element. Yes, I will need to buy a
| new gaming monitor for my son, but hopefully not for
| another three years, and by then most of these ads will
| have disappeared.
| seoaeu wrote:
| But for all they know perhaps you want to purchase one
| for your daughter now or a second one for a dual-monitor
| setup. Ads in general have a very low success rate, so it
| can be worth doing even if the guess is wrong a very
| large percent of the time
| colechristensen wrote:
| Well, the most common ad of this type are for the exact
| item I purchased from the retailer I purchased it from.
| Usually for things which a person wouldn't need two of. I
| tend not to see these ads until after I have made the
| purchase.
| cycomanic wrote:
| My impressions about ads is they are usually not
| interested in selling you what you actually need, but
| they try more to get you to feel like you should buy
| things you don't really need. I suspect it is because
| it's easier and much more profitable (we would spend less
| money if you only bought things we want need).
| bigiain wrote:
| Amazon are terrifically bad at the "things I have already
| purchased" advertising. They _know_ with 100% certainty
| that I bought a webcam 6 months back - because I bought it
| on Amazon. Yet they're still sending me email and putting
| ads on webpages for webcams, including the exact model I
| bought from them...
|
| (I totally expect some shitty AdTech startup to start
| buying remarketing ads for NFTs any minute now. )
| Viliam1234 wrote:
| Maybe the victim in this case is not you, but the company
| paying for the ads.
|
| Think about it this way: You buy a webcam from some
| company X. The company X wants to sell more webcams, so
| they buy ads. Amazon shows those ads to you. At the end
| of the year, company X gets a report saying "we displayed
| your ads to bigiain, and bigiain bought your webcam" (the
| little detail that you bought the webcam _before_ seeing
| the ads is not mentioned). Would this seem to the company
| X as money well spent?
| jefftk wrote:
| Have you considered that Amazon is very good at what they
| do, and that perhaps people who buy a webcam are much
| more likely than then general public to buy another one?
| sillydrivings wrote:
| Considering that the same thing happened to me when I
| last bought a movie on DVD from them and then got ads for
| that very same movie for weeks, no.
| bigiain wrote:
| > Have you considered that Amazon is very good at what
| they do
|
| Cynical-me considers Amazon to be the least-worst of all
| the companies trying to do what they do.
|
| I'm sure their "re-advertise stuff people bought before"
| thing works great for some of what they sell - toilet
| paper or laundry detergent or cat food. So just like
| every "data driven" VC backed startup, they've "validated
| the business model" and are now pumping advertising
| dollars into "scaling" their proven toilet paper sales
| pipeline to webcams. They're probably busy running
| multivariate testing to find if the optimal repurchase
| advertising repeat rate for webcams is down near 4.3
| weeks like laundry detergent, or way up at 9.1 weeks like
| toilet paper. 'cause the data doesn't lie, right? :sigh:
| someguyorother wrote:
| You'd be surprised how often the people who are supposed
| to be good at ads aren't. Organizational inefficiency
| explains a lot of it:
| https://thecorrespondent.com/100/the-new-dot-com-bubble-
| is-h...
| jefftk wrote:
| That may happen in many companies, but I'd be very
| surprised if it happens with remarketing ads and Amazon?
| Performance-based advertising with solid experiments that
| appropriately consider both counterfactuals and long-term
| user value is one of their core strengths.
| rtpg wrote:
| I get where you're coming from. As someone who has had ads be
| "basically" what I want, I've never really believed that
| someone wanting to take my money for a thing I might want is
| _that_ misaligned in terms of interest (kind of like
| recruiters or real estate agents wanting you to take
| basically anything: they might not have your best interests
| at heart but they do want to close a deal). This is, of
| course, a naive view of the world
|
| A sort of value-neutral narrative I've come up with recently:
| the ad -> sale pipeline is basically super flexible (you put
| in X money to get Y clicks for Z sales, but don't really need
| much staff on it). So if you're super good at this kind of
| optimization you can confidently put in the maximum about of
| X money to get even just some profit. And of course outbid
| people who are less confident.
|
| So in the auction-based ad market, the people who will "win"
| the ad space will be people _who are good at auction-based
| ads_! Everyone who really cares about sales funnels etc will
| be able to get better results!
|
| Of course there's like.... misleading copy etc, but I'm more
| and more convinced that the reason for the awfulness is that
| the people who get the slot are getting it for a mostly
| unrelated skill.
| axaxs wrote:
| See, I have the opposite problem in that I'm too impulsive. I
| search for a mattress for 20 mins, then buy one.
|
| The problem is that I then get mattress ads everywhere I
| click for the next 3 months. It's like I need a button to
| mark my query as solved.
| throwaway2048 wrote:
| Part of the issue with this logic is that ads for things people
| were already going to buy are going to preform like gangbusters
| according to metrics, and will be having next to zero actual
| impact on future sales.
| ChuckMcM wrote:
| Not future sales, the choice, _right now_ , that the buyer
| makes.
|
| I suspect it is most effective when you have a "product"
| which several sources in China make under what ever trade
| name you want. (There seems to be lots of electronic test
| equipment like that) And your typical FBA business. Advertise
| you gear when the right keywords come up and get a click
| ahead of the guy selling it at the cheapest price.
|
| If all the products look the same and Vendor B advertises to
| put it at the front and pays a service for a few hundred 5
| star reviews, I would not be surprised if it added 10 to 15%
| to the net margin on sales.
| thewarrior wrote:
| Would love to hear your thoughts on Facebook and how that's
| similar / different
| Supermancho wrote:
| > 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.
| mritchie712 wrote:
| Nothing in your comment would come close to refuting Amazon
| makes more from ads then AWS. Read the article.
| dangoor wrote:
| I think you're misunderstanding where many of these ads _are_.
| They're on Amazon itself. Search for anything on Amazon, and
| you're going to see sponsored listings in the search results.
| Look at a product page, and you'll see competing offerings.
|
| I've got some novels up on Amazon and it is totally accepted
| within the indie author community at this point that Amazon ads
| can absolutely be worth it.
| toddh wrote:
| In fact, pay to play has been the requirement for some time
| now. Organic discovery is long gone. It also effectively
| lowers net book margins.
|
| Got me to thinking that I'd like a way to signal Google that
| my intent is either info or buy. Now it's all buy and the
| results suffer.
| capableweb wrote:
| 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 wrote:
| 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-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-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.
| anoncow wrote:
| 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?
| ehsankia wrote:
| 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.
| lightbendover wrote:
| 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 wrote:
| 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?)
| colinmhayes wrote:
| 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 wrote:
| 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 wrote:
| EspoTek? Because Siglent comes up first in AMZ organic
| searches for me. Not trying to bust your chops, just
| interested in this field.
| AussieWog93 wrote:
| 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?).
| adventured wrote:
| 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.
| vidarh wrote:
| 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
| jefftk wrote:
| _> so it would be safe to assume any personalisation is
| off?_
|
| Depends on whether Amazon is using fingerprinting to
| target ads
| Spooky23 wrote:
| 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".
| adventured wrote:
| > 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 wrote:
| 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 wrote:
| 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.
| xyzelement wrote:
| 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 wrote:
| 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.
| specialist wrote:
| Amazon = eBay + house brands + ad network
|
| It's a marvel that any third parties remain on Amazon.
| kevincox wrote:
| The thing that I hate the most about Amazon search is that
| they return partial matches. So if I search "evaporative
| humidifier" half of the results don't have the word
| "evaporative" in them and I am just wasting my time scrolling
| though and having to carefully read the descriptions.
|
| It seems that they try their hardest never to return an empty
| page, but this is extremely frustrating to a consumer because
| I would much rather you just tell me that you don't have
| something, or only have 10, rather than spreading those 10
| matches over 20 pages of junk results.
|
| I guess their thought is that the results may be "close
| enough" but they aren't! If I am ok with compromising I'll
| remove some conditions from my search upon seeing an empty
| result list. (here is an idea: recommend which terms I can
| remove to find the most results) But they just ignore random
| terms, even if some terms are negotiable for me they will get
| me to waste so much time scrolling though the items that
| don't match the critical terms that I no check other sites
| first.
| joosters wrote:
| 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 wrote:
| 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.
| mountainb wrote:
| 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 wrote:
| 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 wrote:
| 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.
| princevegeta89 wrote:
| 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.
| Griffinsauce wrote:
| 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 wrote:
| 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 wrote:
| 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?
| bigiain wrote:
| > 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 wrote:
| 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.
| mritchie712 wrote:
| Can you put some numbers around "rapidly"?
| patja wrote:
| I've always been stunned by how irrelevant the ads were on my
| Kindle, until I became so annoyed I paid the fee to turn them
| off. Ads for Kindle ebook titles I had already purchased, ads
| for household cleaning products, ads for books in genres I have
| never read (romance), etc. My spouse still gets them on their
| Kindle so I can see things have not improved one iota.
|
| I actually found it a bit offensive, as in "how stupid do they
| think I am to be tempted to buy a book I already bought from
| Amazon", mixed with being puzzled and confused over why a
| company like Amazon would do such a disservice to its
| shareholders by doing advertising so very poorly and leaving
| money on the table.
| [deleted]
| JumpCrisscross wrote:
| > _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 wrote:
| 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 wrote:
| > Who makes this claim?
|
| Matthew Yglesias did in 2013.
|
| 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-chari...
| specialist wrote:
| 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.
| chx wrote:
| How did Amazon steal from investors?
| wmf wrote:
| 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.
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