23 years on, and ‘everything store’ Amazon emerges as the third force in digital advertising
It’s a little-known fact, but relentless.com was one of the original company names Jeff Bezos was very keen on, before he finally settled on Amazon – which is now far more famous than the world’s longest river. Of course, he made the right decision, but his original name choice says a lot about Bezos’ single-minded mission to create what he called ‘an everything store’.
Like so many tech startups, the world’s largest bookstore started in a garage back in 1994, run by Mr and Mrs Bezos, and by the time their servers were sucking up so much power that even running a hair dryer in the house blew a fuse, they moved to a modest office in Seattle. There’s a wonderful picture of Bezos in this office, with a spray-painted Amazon logo pinned to the wall and the great man at a beige PC with untidy spaghetti cabling all over the floor. This is the relentless pioneer who, on 9 January this year, was named “the richest man in history”, having amassed a staggering $105bn.
In many respects, Bezos has realised his dream of running the world’s ‘everything store’, and it’s set to get bigger, wider and stronger. The majority of online shoppers (56%) now start their shopping journey on Amazon, supplanting Google as the number one product search engine. Here’s an even more indicative stat: 52% of American households now use Amazon Prime (while only 49% have a landline phone!), a major reason why Amazon commanded an unassailable 44% of all US e-commerce in 2017, according to eMarketer.
So why wait till now to become a big noise in digital advertising?
Amazon launched its first UK ad sales team in London some 10 years ago with very limited formats and inventory, as the shopper experience remained sacrosanct. And one could easily argue that – compared with its $136bn 2016 income – any revenue gained via ad sales would be nothing but a rounding error. By contrast the mighty duopoly of Google and Facebook continue to command 70% of a global digital ad market worth $229bn.
But relentless Bezos is on another mission, and clearly sees Amazon Media as strategic to the ‘everything store’ and key to medium-term profits. Executives were doing the rounds in 2017 with an impressive story for agencies and advertisers, promising to become ‘an ad platform leader with best in class service’. And they made good headway last year, with reliable estimates suggesting their turnover grew from $2.1bn in 2016 to $3.5bn in 2017. That’s a bit more than Snap and Twitter combined, and even though Amazon has some way to go get near Facebook’s $27.6bn turnover in 2016, it will have solid claims to become the genuine third force as we enter the next decade.
Competing on search, video, display and voice
Undoubtedly, the massive search market is Amazon’s main bridgehead, through Amazon Media Services (AMS). It is uniquely capable of matching real-time advertising to e-commerce, with the benefit of knowing what people are actually buying. Trading on keywords, ads can appear at the top of the listing, on selected pages, and even next to a competitor’s product, making the PPC option very attractive. The UK search market is heading towards £6bn in the UK, and ripe for this kind of competition. At iCrossing we’re seeing some very impressive numbers for our clients, and where ROI is higher for brands selling direct on Amazon, we’re prioritising the channel.
Also playing in the brand space is Amazon Media Group (AMG) offering video formats, sponsorship opportunities and native display across the likes of Prime video and Kindle, as well as their video game streaming network, Twitch, which has an impressive 100m users worldwide.
Alexa – Amazon’s little helper to bypass brands?
But perhaps the most interesting and strategic play for Amazon will be though Alexa. We’d already had some match practice talking to Google and Siri on our smartphones when Amazon simplified the whole experience with the launch of Echo, which now dominates the market and features the polite and ever-so-helpful Alexa.
While our early requests involve asking Alexa to play music, set a timer or answer trivia questions, make no mistake, she’s a key figure in Bezos’ end game. According to Experian, 32% of Prime Echo users in 2017 bought at least one thing with Alexa’s help, and as it becomes easier and cheaper, Echo shopping will become habitual – possibly to the detriment of brands. The formidable business prophet Scott Galloway pointed out that the number of voice requests that contain a brand prefix is declining, and particularly in the FMCG sector, Alexa could wipe away all the investment brands make in packaging, shelf space, promotion, and vital relationships with retailers. So, when you simply want some AAA batteries, guess which brand Alexa might suggest?
Through the Alexa and Prime combo, Amazon consumers could easily be offered the products of preferred suppliers at the cheapest cost. And that could be the biggest game changer we’ve ever seen, propelling the relentless Jeff Bezos’ personal wealth a weeny bit closer to the historical record set by Augustus Ceaser (63 BC – 14 AD) who controlled the world’s most powerful states, and was worth $4.6trn (give or take) in today’s money.
So, just a little way to go, Jeff.
Guy Phillipson is the chairman of iCrossing UK and the former chief executive of the Internet Advertising Bureau UK