Amazon Searching for New Revenue Streams
By George Anderson
Amazon.com plans to test a program that would place links to products on the retailer’s partner sites, similar to the system employed by Google.
According to Chris Beasly, founder of Website Publisher, Amazon has invited a group of users including himself to participate in a beta test of the program.
“The way they want the beta test to work is to give you a special code for Amazon’s Keywords Recommends banners (the banners that you feed a keyword to and they show related products) and have this special code then show these new ads 50% of the time,” Mr. Beasly wrote on his SitePoint blog.
“On the phone last night it was explained to me that this is more or less an Adsense clone, meaning third party sponsored links, not Amazon links. It is known that Amazon currently get’s sponsored links for their own sites from Google, but apparently they wish to take out the middleman and break out on their own. The fact is that while Amazon has a high gross revenue, they have really thin profit margins, whereas Google and even eBay have much better profit margins. So I think there is probably a little bit of business jealousy at work here, and rightly so. Amazon realizes that if they want to compete as a major Internet destination, not just an ecommerce site, they need to capture a larger chunk of the online advertising revenue.”
Moderator’s Comment: Is Amazon on the right track getting into the contextual advertising business? Does it have to make itself more than just an e-commerce
site to operate more profitably? –
George Anderson – Moderator
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5 Comments on "Amazon Searching for New Revenue Streams"
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Yes, yes, yes, more ads, bring it on. There may be something out there that I would never think of buying if someone didn’t rub my nose in it.
Ultimately every retailer has to be able to drive profitable top-line growth, and one key to this involves adding products or services that are in demand and improve the profit mix.
Following this thinking, Amazon doesn’t necessarily need, in the short term, to enter the advertising business, but it certainly is a strategically sensible move. In some respects, it parallels the convergence taking place in the supermarket business where retailers and manufacturers are striving to develop in-store media that connect effectively with the shoppers. It all makes a lot of sense to me.
This is an outstanding example of taking the merchandise, virtually anyway, to the customer, rather than expecting the customer to come to you. Just like getting your hot dog and soft drink at your seat in the ballpark! This has gotta work. The only potential for failure is in a screwed up execution.
Via saturation advertising and low-margin pricing, Amazon got big. Now it needs to get truly profitable. Ad distribution has great margins, certainly compared to books, entertainment products or almost any other merchandise. So Amazon’s strategy is good. If the execution is poor at first, they’ll learn from it and get better. They’ve certain proven themselves to be flexible many times in the past.