Search industry and Advertising price: Amazon Ad Market
Article: Amazon Sets Its Sights on the $88 Billion Online Ad Market by Julie Creswell
https://www.nytimes.com/2018/09/03/business/media/amazon-digital-ads.html
The article talks about how Amazon, which has already reshaped and dominated the online retail landscape, is quickly gathering momentum in a new, highly profitable arena: online advertising. This is an example of a company doing novel work in this area. Amazon is rapidly emerging as a major competitor to Google and Facebook. Some companies, even if they don’t sell their products over Amazon, they do advertise on it, just like Verizon. The article mentioned that “On Black Friday last year, when millions of online shoppers took to Amazon in search of deals, a Verizon ad for a Google Pixel 2 phone — buy one and get a second one half off — could be seen blazing across Amazon’s home page” (Creswell). Amazon is currently developing a new way of presenting the ads, which allowing the products being advertised silently immerse into consumers’ minds and give consumers incentives to purchase. In the company’s most recent financial results, it was a category labeled “other” that caught the attention of many analysts. It mostly consists of revenue from selling banner, display and keyword search-driven ads known as “sponsored products.” That category surged by about 130 percent to $2.2 billion in the first quarter, compared with the same period in 2017, indicating its potential enormous profits. The partial reason for Amazon to be such successful in its advertising sector is that it has a much more controlled environment on its e-commerce site where the products are being sold, thus being highly effective in marketing the products.
This is highly related to the topics of search industry and advertising price that we have discussed in class. Advertising is actually a charge in exchange of good impressions. The traditional ways of advertising platforms are newspaper, TV, etc. Google and Facebook are examples of the most common modern day online advertising platform, as they charges for clicks on ads. The way of setting price for ads actually functions quite similar to the second-price auction and find the “market-clearing price” for the ads. Much of these online advertising, however, relies on certain imprecise algorithms that govern where marketing messages appear, and what impact they have on actual sales. On the other hand, Here, Amazon has a big advantage over its competitors. Thanks to its wealth of data and analytics on consumer shopping habits, it can put ads in front of people when they are more likely to be hunting for specific products and to welcome them as suggestions rather than see them as intrusions.