Looking to leverage the massive amount of data around its numerous site users, Amazon is reportedly developing its own software for placing ads online.
The in-house ad placement platform, called Amazon Sponsored Links, is expected to be tested later this year as Amazon replaces ads on its site that are largely supplied by Google. Amazon does place some product ads on its own site and has a small business supplying ads on other sites, but it has been tentative about using its customer data to expand those efforts.
The bigger opportunity is tapping its shopper insights to supply ads to other sites in a challenge to Google's domination of online sales.
"Amazon could use the data it has about buying behavior to help make these ads much more effective," Karsten Weide, an analyst at researcher IDC told The Wall Street Journal. "Marketers would love to have another viable option beyond Google and Facebook for their advertising."
Amazon's offering is expected to resemble AdWords, Google's engine that places keyword-targeted ads based on search queries and supports its $50 billion-a-year advertising business. But Amazon is also reportedly developing a tool to enable advertising agencies to buy in bulk for numerous advertisers, a path that would support placement on third-party sites.
Amazon faces a major hurdle catching up to Google's capabilities, with AdWords itself 16-years-old. But Amazon's potential advantage is the knowledge of its customer preferences as well as its own inventory — something it already prevents Google from using for enhanced product ads.
JP Mangalindan wrote for Fortune, "Amazon's treasure trove of customer data could be used to make ads more 'click-worthy' to users — even more than Google's efforts — which certainly would be attractive to cash-focused advertisers."
How much of a potential threat is Amazon to Google's dominance in the online advertising business?