With limited fanfare, Amazon has built a multi-billion dollar advertising business that some observers believe could not grow at the expense of digital advertising’s so-called duopolists, Google and Facebook, but one day even threaten their dominance.
Increasingly, Amazon’s ability to entice brands into sending it their ad dollars is being bolstered by the company’s unique position as the 800-pound gorilla of online retail.
While Google and Facebook have amassed vast amounts of data about their users, theirs is unlike Amazon’s, which includes the purchasing histories of a massive number of customers, including the more than 100m who now subscribe to the company’s Prime service.
The latest example of how Amazon is using its data and customer relationships to bolster its position with advertisers comes in the form of a new offering that allows brands to send free samples to Amazon customers who the company believes might be ideal buyers.
As reported by Axios, “Samples of new products are sent to customers selected using machine learning based on Amazon’s data about consumer habits, according to recent job postings and details listed on its site.”
A page on the Amazon site describes the benefits of its offering for shoppers:
“Amazon helps you discover products you might love by sending you FREE samples from new and established brands. It’s like Amazon’s product recommendations, but real, so you can try, smell, feel, and taste the latest products.”
Sampling has been a part of many brands’ marketing tool kits for years, especially in industries such as consumer packaged goods (CPG). Not surprisingly, given the rise of digital – often at the expense of traditional offline channels – the popularity of digital sampling has increased in recent years.
But its growth has been limited by the fact that few players in the space can offer the scale of Amazon. Now that the retail behemoth appears poised to get into the digital sampling game in a big way – including, potentially, through a self-service platform – it could be a game-changer for the channel.
For many CPG brands, digital sampling is especially appealing because it not only offers many of the benefits of digital advertising generally, including targetability and trackability, but is also inherently a driver of sales.
In addition, brands might find that, if employed intelligently, Amazon’s sampling offering could reduce their need to spend money on Vine, a program through which brands effectively pay for reviews from trusted reviewers. That is because increased sales driven by sampling could produce more reviews organically.
Capitalizing on co-op
For Amazon, robust digital sampling offerings could allow it to capture more dollars from advertisers, in part because those dollars won’t necessarily be coming from the budgets that Google and Facebook are competing for.
As Pivotal Research Group senior analyst Brian Wieser explained, “I would think this would play in well to Amazon’s efforts to capture more activity from packaged goods companies. To the extent that this sort of an initiative would capitalize on co-op/trade promotion budgets (rather than brand advertising) it’s probably helpful.”
If digital co-op takes off, that might be an understatement.
While Amazon’s now $5bn-plus a year ad business demonstrates the growing willingness of many brands to put aside concerns they might have about Amazon, the possibility of the company becoming the dominant digital sampling player might give some pause. After all, Amazon will once again be situating itself between brands and the customers who buy their products, and making sure it profits from both.
Of course, that’s not really a new dynamic. The rent brands pay to Amazon for access to its growing and increasingly diverse portfolio of ad offerings is effectively the evolution of the slotting fees brands paid and still pay to supermarkets.
If Amazon can help them move product, brands that are capable of managing their margins will almost certainly continue to send Amazon their dollars.
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