Amazon Exploits its Cloud Monopoly to Build Advertising Business
Reporter Karina Montoya writes how Amazon prepares to capture another market powered by AWS.
For much of the last decade, Google and Facebook have dominated the online advertising market, capturing more than half of U.S. digital ad spending and attracting a major antitrust lawsuit by a coalition of state attorneys general. But in recent years Amazon has steadily built up its own earnings from selling ads, and new ad tech tools that leverage Amazon’s dominance of cloud services look likely to speed the corporation’s efforts to grab a bigger share of this business.
Launched in June, the company’s latest ad tech tool, Amazon Marketing Stream, will automatically stream real-time performance data on client Amazon Web Services accounts in ways that will, Amazon says, empower them to better manage their marketing budgets. Some marketing agencies rushed to celebrate this new feature, which is designed to provide them with as much performance data for their Amazon ad campaigns as they get with Google’s ads.
The move into advertising has already proven to be extremely lucrative for Amazon. The corporation’s advertising revenues hit $31 billion last year, and its second quarter revenues this year rose 21 percent year on year to $8.7 billion, putting Amazon on pace to close 2022 with at least $37 billion in this business segment. As recently as 2016, Amazon earned only $1.4 billion from advertising.
Initially, most of Amazon’s advertising revenue was extracted from sellers on its marketplace, who were often all but required to buy advertising in order to sell their goods. More recently, however, much of this growth appears to have been generated by Amazon’s leveraging of its dominant position over cloud services, where Amazon Web Services (AWS) holds at least a 48 percent market share globally.
As Business Insider reported earlier this year, ad industry executives say that AWS will play a key role in Amazon’s ad business growth through a product called Amazon Marketing Cloud (AMC). Launched in 2021, AMC is known as a “data clean room” in cloud services jargon. It’s a space where advertisers can pool anonymized data on existing and potential customers to see how their campaigns on and off Amazon overlap. For example, brands can use AMC to continuously optimize their spending budgets by mixing insights from their first-party data with Amazon’s own behavioral shopping data to place ads across the web.
Also in June, the corporation introduced Amazon Marketing Cloud Insights on AWS, a tool that makes it easier to use AWS to store, analyze, and visualize reports that would otherwise take weeks to pull separately. In August, The Information reported that AWS is preparing to unveil Bastion, which will allow multiple companies to pool their own anonymized customer data to see how it overlaps not only with Amazon’s own insights, but with each other. That way, a retailer like Target could see how many of its customers share similarities with those of HBO Max or Hulu, and use those insights to sell products to consumers and seek new customers.
As Google and Facebook are being scrutinized for their use of third-party data to consolidate market power, “data clean rooms” are gaining popularity among advertisers as a way to continue targeting ads across the web without violating privacy laws. While these days most of the tech press is excited with Apple’s emerging growth in mobile advertising, the real story in this sector increasingly looks to be Amazon’s efforts to leverage its many existing monopolies to manufacture yet another chokehold on American democracy.
This article originally appeared in The Corner newsletter of September 8, 2022.