Amazon is expanding its advertising business by allowing other retailers to utilize its proprietary ad tools on their own websites. This initiative, named Amazon Retail Ad Service, aims to simplify the process for retailers to conduct targeted ad campaigns. Amazon's digital advertising sector has grown significantly, now ranking third in the U.S. behind Alphabet and Meta.
The service enables retailers to display "contextually relevant ads" in various areas of their sites, including search results and product pages. Initially available to U.S. retailers, the pricing structure is based on usage levels, although specific fees have not been disclosed. In 2022, Amazon began reporting ad revenue separately, revealing it generated $14.3 billion in the latest quarter, a notable contribution compared to its online store sales of $61.4 billion and cloud computing revenue of $27.4 billion.
The majority of Amazon's ad revenue comes from sponsored product advertisements, which are keyword-targeted ads. With the new service, retailers can customize ad design, placement, and quantity while utilizing Amazon's measurement and reporting tools. The service operates independently from Amazon's retail business, with retailers managing their data through AWS accounts.
This initiative could enhance Amazon's ad prediction and recommendation capabilities, with initial customers including iHerb, Weee!, and Oriental Trading Co. Paula Despins, vice president of Amazon Ads Measurement, expressed optimism about the service's potential to benefit retailers, advertisers, and shoppers alike. This announcement precedes the National Retail Federation’s annual trade show and follows Amazon's history of offering its technology to third parties, such as through Amazon Web Services and the Buy With Prime service launched in 2022.
