OK, so even remembering that announcing a new technology product isn’t the same as actually putting a working product into the market (as Microsoft (MSFTWealth Strength IndexMSFT is Moderately Up and trending Up) and Intel (INTCWealth Strength IndexINTC is Moderately Flat and trending Up) have proved over the years), but this announcement from Amazon (AMZNWealth Strength IndexAMZN is Moderately Flat and trending Down) is still a very big deal.
Amazon has announced a new advertising tool that lets companies selling on Amazon buy digital ads that will follow shoppers wherever they travel on the Internet with ads intended to lure those consumers back to Amazon to make a purchase. The tool goes out to select merchants for test later this month, Bloomberg reported today.
Currently companies can buy other types of ads on Amazon, but the new tool lets merchants bid on ads that will appear on other websites and apps. Those merchants will only pay Amazon when costumers click on the ads. Bloomberg asked Amazon where the ads will appear but the company declined to specify sites or apps.
Amazon’s ad business is one of the fastest growing parts of the company, generating $1.7 billion in revenue last year, according to EMarketer. The business may be fast growing but it’s still just a fraction of the size of the ad business at Alphabet–$95 billion in 2017 and an estimated $38 billion in revenue for display ads in 2018, according to estimates from UBS. Facebook (FBWealth Strength IndexFB is Moderately Flat and trending Up) saw revenue for all types of ads hit $40 billion in 2017.
But Amazon does have a key advantage. At a moment when advertisers are asking hard questions about how many sales actually result from their ads, Amazon will be directly linking ads to its marketplace. That will make it easy to count sales, and not just clicks or impressions, and it is quite likely to increase conversion rates since potentially customers will be able to make a buy after clicking through directly on Amazon’s site.
Given the huge distance between Amazon’s nascent business and the Google and Facebook behemoths, this news hasn’t had much effect on the share prices of the sector giants.
But it was a different story today with smaller companies that specialize in what is called re-targeting. Shares of Criteo (CRTO), for example, which saw $2.3 billion in revenue from its re-targeting technology last year, were down 2.62% today, March 14.