Amazon ramps up challenge to duopoly with Sizmek ad server acquisition

Sizmek sells adtech assets to Amazon

Amazon has further boosted its credentials as a real threat to Google and Facebook’s digital dominance with the acquisition of Sizmek’s ad server and Dynamic Creative Optimization (DCO) business.

The adtech firm put the assets up for sale in March after falling into liquidation. It offloaded its demand-side and data management platforms to Zeta Global the following month.

Terms of the latest deal have not been disclosed.

Rumors that Amazon would snap up the ad server had been circulating for some time given Sizmek’s scale: its ad server is widely considered to be the only one on the market that could viably stack up to Google’s Marketing Platform.

Jeff Bezos’ monolith confirmed the adtech purchase today (31 May), reassuring Sizmek’s customers they would continue to be served “at the high standards they’ve come to expect” in a statement.

Amazon noted the two digital businesses already share a proportion of their customer base. However, for now, Amazon plans to operate Sizmek Ad Server and Sizmek DCO separately from its core advertising business.

“We look forward to working with the team, and we’ll share more updates as we invent and create new opportunities to better serve our advertisers over time,” the statement concluded.

Challenging Google

Google's robust adtech stack, ad marketplace and media content make it an advertising behemoth.

Facebook took aim at the mighty adtech stack when it bought Atlas in 2013. However the acquisition ultimately tanked under Zuckerberg's care and was shuttered just three years later, leaving what was then known as Google DoubleClick to rule supreme.

In an email, Forrester analysts Joanna O'Connell and Collin Colburn questioned whether Amazon might meet the same fate as Facebook, especially as advertisers are weary of doing business through Amazon's new server.

"How does this acquisition help Amazon compete?" they wrote. "It can round out their capabilities, certainly, making it a more effective ad platform, which in turn can help grease the wheels for additional spend with Amazon.

"But are brands going to comfortable having their ad serving solution come from Amazon? [We] don't believe so."

They added that this acquisition should ideally spur some innovation internally as "Amazon has been painfully slow to improve and innovate their ad products."

In 2018, Amazon earned $10bn in digital advertising revenue, a 95% year-over-year uptick. That number puts it third behind Google and Facebook in the US, but Amazon still has catching up to do everywhere else.

"In the global context, Amazon is still in the number four spot behind Alibaba, and that is where it remains to be seen whether it has the power to unseat the Chinese-based ecommerce powerhouse,” said Monica Peart, senior forecasting director at eMarketer.

What it means for marketers

But just because Amazon is bolstering its adtech stack, it doesn't mean it will act as a catalyst for increased ad spend across the industry.

O'Connell and Colburn, who previously warned against Sizmek's sale to Amazon, said the tech company's move will likely further divide the ad spend pie, rather than increasing overall budgets.

"That said, where new dollars could come from might be from the massive world of trade marketing," they said. "We’re already seeing a good amount of dollars flowing into Amazon Advertising from trade and shopper marketing, and this might fuel more of those dollars to come online as CPG firms are swayed by being able to measure and track ad dollars to conversion on Amazon.

"But regardless, this does nothing to help publishers who are not Amazon in their pursuit of ad dollars. And it's important not to lose sight of this."

Still, the e-commerce giant will certainly look to capture parts of advertisers' non-Amazon budgets as it hunts down Google's control of the market.

Ari Paparo, chief executive officer of adtech company Beeswax, said that while Amazon's purchase of Sizmek's assets should broaden its demand-side platform, the company will still have to to foster an open dialog with marketers.

"Amazon needs to realize that the ad serving sector is complex and very competitive," he said. "If the company doesn’t invest in the kind of enterprise sales and support customers expect, they are unlikely to make this deal successful."

Al DiGuido, president and chief revenue officer of North 6th Agency, backed this claim that Amazon will need to build out a substantial service layer to essentially act as customer support for marketers to leverage the platform.

"Any thought that this tool set is pure plug and play is misguided," said DiGuido.

"Marketers don’t really want a 'tool kit' – they want advice and counsel, including ideas on how to put the tools to work to drive the business outcomes they need in real time."

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