Amazon announced in late June 2011 that they will be jumping into the advertising industry, and you can be sure that other online retailers will follow. Amazon will expand from just selling targeted ads on their site to selling targeted ads on other websites too.
This is how the process works: Amazon mines through their data and creates buckets of potential marketing targets. With the help of the ad tech start up, Triggit, and the use of cookies, they then track where visitors to their site go after they leave. Amazon then purchases ad space those visitors are looking at, delivers a relevant ad, and then charges the advertiser for the impression.
So who wins in this system? It is actually a win for everyone because the consumer sees ads for products they want to buy, Amazon (or any other online retailer) makes money off of its own data, and the advertisers see their ad dollars become more effective. The numbers show that behaviorally targeted ads dramatically outperformed the entire display ad category in 2008 and 2009. These numbers attest to the opportunity this win-win-win scenario has for Amazon and anyone who follows them.
Out of the online retailers out there, Amazon is definitely going to make the biggest splash into the ad network space because of their extensive, 10 year storehouse of proprietary customer data. However, you can be sure that any other e-commerce business with customer psychographic lists will be soon getting into leveraging that data for advertising too. Every one of them has an opportunity to copy Amazon’s model now.
On the other hand, Amazon will undoubtedly have to jump through hoops to address privacy concerns because of the personal information involved in the targeting process. It is not yet clear to what extent these concerns will be brought up, but other online retailers will most likely be able to let Amazon work those out and easily fall in behind their precedent.
In short, behavior targeted advertising has been around for some time now, but this new development is improving the consumer targeting and widening the accessibility of this technology to advertisers who weren’t able to utilize it before.
What is the future of all this? It is projected that by 2014, about 1 out of every 5 display ad dollars spent on banners, rich media and video units will be tied to behavioral targeting.
What do you think? As an online retailer, advertiser or consumer, is this a positive step forward or not?
