The Drum Awards for Marketing - Extended Deadline

-d -h -min -sec

Ecommerce Retail Content

Amazon: Two decades in and just getting started

Author

By Seb Joseph | News editor

July 15, 2015 | 6 min read

While the first 20 years of Amazon were about goods and logistics, the next ten years will be about data and content as the aging business paves its way to profitability.

From its humble beginnings as the original online bookstore to its transformation into a tech giant, Amazon’s milestone comes at a time of wary optimism for the future. Today’s (15 July) Prime Day, a members only event to celebrate the last two decades, belies a retailer keen to mitigate some of the volatility it has endured in the past with a focus on boosting membership to the premium service instead of boosting sales.

With this in mind, the company is likely to use the event to tout the benefits of being a Prime subscriber who can access its video and music streaming services especially off the back of a string of deals including one with Woody Allen. While Amazon has ballooned to dominate ecommerce since it went pubic in 1997, its endeavours beyond that core service have been hit and miss, resulting in more money being pumped into the business now than ever before.

Whether it's trying to stave off the advances of Alibaba or ploughing millions of dollars into original programming, Amazon’s current predicament has left some analysts concerned that it will struggle to improve its earnings outlook for the remainder of the year. But given that shoppers can now fully immerse themselves in Amazon’s ecosystem, doing anything from listening to music to the grocery shop, then Prime could attract advertisers into what has been a closed storefront.

Rob Webster, chief product officer at ad tech firm Crimtai and ex-director of data and technology at MediaCom, said time would tell as to whether the retailer would seek to forge stronger ties to advertisers to survive in the fast-changing media space. Indeed, Amazon is a media business whose media business plays second fiddle to ecommerce with revenue from the former bundled into a segment called “other” when it reports its earnings.

Amazon does not break out advertising revenue but eMarketer predicted it would top $1bn last year, which would be around half as much money Yahoo’s display advertising generated in 2013. Several media experts have suggested that the retailer only sees advertising as a way to bring in additional income in a relatively low-cost way rather than help curb its penchant for not turning a profit.

“They clearly have superb data assets but for obvious reasons are doing it under quite a closed ecosystem, said Webster. “This puts them into a world they are not used to operating in. In terms of data and technology they are completely self-sufficient. However it will be interesting to see if they need future partnerships or acquisitions to navigate the media landscape.”

The company’s push into original programming, while helping it to extract further value from its subscription model, could also open up new revenue streams from brands. Amazon denied reports last year that it was set to introduce ad-funded video though interestingly did not rule the possibility of introducing the service in the long run. Such a move could accelerate the growth of its advertising network, the Amazon Media Group, which already sells advertising through the retailer’s properties such as IMDB.com and DPRview.

“Whilst the first 15 years of Amazon were about shopping, the last five years and the next 10, at least, will be about content,” said Clare Broadbent, chief executive at content agency Cedar.

"At the start of the year, Amazon Studios proved itself a major player in the television field when its original programme Transparent won the Golden Globe for best TV series, musical or comedy and star of the series, Jeffrey Tambor, won best actor. It was Amazon’s first-ever Golden Globe award, and the first online series to ever win a best series award, comedy or drama. The weekend after the Golden Globes, the company aired Transparent for free on its online Prime Instant Video service to promote a discounted rate for new subscribers.”

Should Amazon continue down this path, then it would only serve to further highlight the similarities between itself and the likes of Google and Facebook. Keeping users within their sprawling ecosystems is the top priority for the world’s biggest media players although the only difference between Amazon and technology players now is that the former takes a percentage of the foods it sells direct to customers rather than just selling ads.

If Amazon continues on this trajectory then it could draw the gaze of EU regulators, forcing the business to prove, similarly to Google, its one-stop-shop nature is not anti-competitive.

John Newbold, co-founder at product innovation studio 383 said: “But as Amazon grows, it could run into Google’s issues with the EU, the one-stop-shop nature may boarder on monopolisation. From the customer’s point of view, that’s not necessarily a negative - as providers battle for attention the customer will, at least in the short term, get a ton of cheap deals, new offers and the silver lining of free storage!”

Amazon is set-up to scale rapidly into many different business models. Internally, it runs Software Orientated Architecture, basically meaning it can reuse its APIs to point its interests at new areas with the ability to learn and even monetise services that may have not quite succeeded as expected.

The retailer has been in a 18-year growth cycle since it went public and as it celebrates its 20th anniversary there are signs its content and data offering will help steer its focus on earnings rather than revenue.

Ecommerce Retail Content

More from Ecommerce

View all

Trending

Industry insights

View all
Add your own content +