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Mobile Dev Memo Podcast
Season 7, Episode 18: Understanding Amazon's advertising advantages (with Adam Epstein)
00:48:36
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- [00:01]
A
Plenty of mobile growth strategies are still built on broken journeys and incomplete data and it's costing brands big time. Branch fixes that it's your AI powered MMP that unifies your links, measurement and user experience across every channel to successfully acquire, retain and engage your app users without wasting spend. Learn more@ Branch IO and while you're there, check out Branch's AI Search and Discovery report covering insights from more than 300 marketing, growth and digital leaders on how they're responding to the rise of AI search.
- [00:37]
B
The problem is that the distinction needs to be drawn between the competence of the economists and the correctness of their analysis. Welcome to the Mobile Dev Memo podcast. I'm your host Eric Suefert and I'm joined today by Adam Epstein who is joining the podcast for I believe the third time. Is that right, Adam?
- [00:58]
C
That's right, Eric. Pleasure to be here.
- [01:00]
B
Pleasure to have you. So we spoke last year, I believe right after can and as we speak now can will be in a few weeks.
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C
I think that's right.
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B
Okay.
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C
Are you going?
- [01:10]
B
No, that's not my event.
- [01:12]
C
Not a linen and guy, Eric.
- [01:14]
B
Not a linen rose, yacht, parties doc, shoes and brand strategy guy. But I don't know, maybe one day if someone paid for me to go, I would go. Okay. I want to talk about Amazon as you're the sort of designated mobile dev memo Amazon expert. They just had their upfronts. Before we get to that, can you please reintroduce yourself to the audience?
- [01:33]
C
Sure. Adam Epstein, Co founder and CEO of GG GG is an agentic operating system for Programmatic Media. Our first product is AI Agents for the Amazon dsp. We launched this product in summer of last year. Since then we've grown very significantly. We power hundreds of millions in Amazon DSP spend. In November last year, we won Amazon's prestigious Global Technology Innovation Partner award and. And we're continuing to grow. Prior to Gigi, I was previously co president of a large retail media company called Perpetua which is now owned by Omnicom. I've been working in Amazon ads as a partner for almost eight years now and have powered billions in ad spend and 15 to 20 billion in GMV. And excited to share some of those learnings today with you.
- [02:22]
B
Yeah. And you know, full disclosure, I'm an investor in gg. Okay, let's just dive right into the Amazon upfront. So Amazon announced that it's upfronts. Was it last week or the week before? I think that its authenticated graph now deterministically reaches 99 it almost sounds like ridiculous when I say it, but it's authenticated. Graph now deterministically reaches 90% of U.S. households with verified logged in non model data. Talk me through the implication of that for advertisers. What's the power of that data set?
- [02:49]
C
Sure. So to understand the power of that data set, we need to understand where the growth of Amazon's advertising business is going to come from. So Amazon's advertising business in 2025 was just shy of $70 billion, still growing 20% is year on year. If you forecast that out, it'll likely grow to a little over $80 billion in 2026. And the path to $100 billion in advertising revenue is going to come primarily from Amazon's dsp. So Amazon's advertising business is split in two on site sponsored ads, which are pay per click ads that occur on search or product detail pages, or the Amazon DSP which uses Amazon's first party shopping data as well as a suite of other Amazon ad tech tools to buy display ads, video ads, primarily connected TV ads, and audio ads on Amazon's owned and operated properties like Prime Video as well as other third party properties like Disney and Netflix. A lot of Amazon's advertising growth, if not all, is going to come from the Amazon dsp, primarily because the advertising revenue on sponsored ads are capped by one inventory. So everything on Amazon is already an AD and price CPCs have more or less flat flatlined on Amazon sponsored ads because sellers and brands on Amazon.com are unable to pay for more for ads based on their profitability thresholds. So a lot of this incremental revenue is going to come from the dsp. And specifically a lot of this incremental revenue revenue is going to come from CTB buying. If you look at all of the channels that Amazon DSP offers, display advertising is not a growing market. There's less and less time occurring on traditional websites as people spend more and more time in LLMs. However, CTV is a growing market. It's a significant piece of Amazon's market share, specifically the stronghold that they have within Prime Video. And the way in which media buyers buy TV ads. At least the largest media buyers, they buy so with a notion of reach and they buy so with on a notion of frequency. And in particular, having a deduplicated identity spine to manage to reach in frequency across all TV buys is a critical piece of a broader TV strategy. So Amazon has this unparalleled advantage in this identity spine that they've created by having 90% of US households which is really built on the foundation of an announcement that they had last summer with Roku. So last summer at can, when we last spoke, Eric, Amazon and Roku had an announcement in which Amazon effectively said that they partnered with Roku to create a unified identity service combined between Amazon's notion of US identities as well as Roku's. And Roku is able to complement Amazon's because Roku is the largest OEM in TV hardware, connected TV hardware. And so effectively they've been able to close gaps that Amazon was unable to identify by deterministic households themselves to create this unified identity spine. And so now with this unified identity service, Amazon can go to TV marketers who are ostensibly buying TV ads in other places. And those other places could be linear TV buys with publishers, it could be other enterprise DSPs like DB360 and Trade Desk and effectively say you should centralize all of your TV media buying into Amazon because in doing so you, you will have the highest signal identity layer for unified reach and frequency out of any possible other mechanism of buying TV ads. And that's very powerful to the largest TV media buyers, brands and agencies in the world.
- [06:50]
B
I want to dig into that. So how does an agency or an advertising partner compare the utility of that identity spine to what's on offer from other DSPs? Right, so Gigi, and thank you for not being overly commercial here, but you could talk about Jiji a little bit what Gigi does, but Jiji supports agencies. Right. So like, talk to me about the value from the perspective of an agency who's going to be buying on behalf of clients. Like, what's the value of that identity spine? That the utility of that identity spine relative to what else they might be buying from in a programmatic setting, Sure.
- [07:19]
C
I think it's important to understand media planning across an agency and how an agency would choose to allocate media for a brand across other enterprise DSPs. And so if you think about the unique offering that Amazon has and the advertisers that Amazon has, as we all know, Amazon has this incredible subset of E commerce and CPG brands in which Amazon has incredible degrees of proprietary data on a significant amount of purchasing decisions done across their product offerings. And so those are often known as endemic advertisers to Amazon, Amazon effectively has done a very good job over the past few years of centralizing CTV spend across endemic advertisers to the Amazon dsp and a lot of the tailwinds and a lot of the market share that Amazon has gained over the past let's call it two to three years, has been creating their DSP to be not just a place for endemic advertisers to buy prime video inventory or display inventory to drive sales on Amazon, but really a full funnel solution across all CTV and all display and audio media buying for endemic advertisers. So Amazon's done a phenomenal job of that, particularly though Amazon's growth and the work that they're doing with agencies and brands right now is understanding and influencing media buying and planning decisions across non endemic categories. So let's just even talk about what are the biggest non endemic categories for someone like Amazon. And it'd probably be financial services, it would probably be pharma, and it'd probably be auto. Let's actually begin with auto. And so I think this is one of the most unique things about Amazon's advertising business and the strategic levers that Amazon has been pulling over the past, let's call it three to four, even five years, in that Amazon has done a phenomenal job of creating pseudo endemic categories for non endemic categories. So auto as an example, yes, Amazon has this treasure trove of shopping data of when people buy cars, how people make household and family decisions around if someone has a baby, they're probably likely to buy an SUV or a minivan. But another really interesting thing that Amazon's built over the past few years is something called Amazon Autos. And Amazon Autos is effectively digital showrooms for any auto OEM to create for consumers to begin to compare and contrast various cars. And additionally for some auto OEMs, they've actually enabled the ability to purchase those cars on Amazon. Now, while that's a very, very small percentage of an auto OEM purchasing history in the US And I actually spoke to a CMO of a large auto OEM and I said like, how many cars are people buying? And he said, I'd like it to be more, but more than you think, which is actually really compelling. But the most interesting thing is now Amazon Autos and these digital showrooms has really just created a unique touch point on the path to purchase for some of those auto OEMs. So rather than just going to the auto OEMs website or a dealer website, Amazon has effectively created a new touch point to move people down the path to purchase that is unique and proprietary to them that no other DSP has to offer. And so effectively they've created this massive category, they've gone to this massive category of auto media buying, which is one of the largest CTV categories in the world. And have effectively said, not only do we have this unique data advantage in terms of our reach on US households, but we have these unique data advantages. With the first party data that we have on Amazon.com proper as well as Amazon autos, you can extend that to pharma. So think about all of the purchasing history that Amazon has about people and their health. Additionally, Amazon hasn't exposed this data and I'm not inferring that they do, but Amazon has made a number of acquisitions and had a variety of initiatives to deepen their retail footprint. On the pharma stack, I think that there's a product called One Medical which allows you to get all of your prescriptions from Amazon. They bought Pillpack not too long ago for over a billion dollars. They haven't exposed those data sets to advertisers, but theoretically, if they did, then Amazon has effectively taken another non endemic category and made it incredibly endemic and given it an unfair data advantage in that category. So if we think about the reach and we think about this household penetration, it's about Amazon creating unfair data advantages relative to other ways that people would buy TV ads in particular, and using those unfair data advantages to centralize as much as one's budget as possible to the Amazon dsp.
- [12:24]
B
Yeah, that's, that's. First of all, it's very complete and it's just fascinating. So I wrote a piece recently called Amazon's Advertising Advantages. And the whole point was they've got this identity spine which is unmatched, right? I mean, it's just that the fidelity of that is unmatched. If you look at Amazon's revenue growth, right, it's sort of like it was decelerating from a high of 27% in Q4, 2023, it deceled down to like 18, but now it's back up in the mid-20s and has been for the last four quarters, right? And you tie that to all these partnerships that it's done, right? Where if you think about historically, like the walled gardens, you saw that the prevailing strategy, the dominant strategy is we've got. Oh no, we have exclusive access to this data set. The data set is provided by other people. They send us their data, advertisers send us the data, we warehouse it, we augment it, we create profiles and then we apply it to our own inventory. And Amazon's strategy here seems to be the opposite. We've got our own data. This is proprietary data to us through across any number of verticals. Like you said, one medical pill pack diapers.com, you know, you name it, they've bought all of these properties, they've embedded them into the Amazon retail experience, they're generating proprietary first party data and they're broadcasting that out. That wasn't the strategy of a meta meta shut fan down on the web. And I mean my understanding belief is that fan for mobile is very deprioritized within the company. But that's not the case with Amazon. Amazon is broadcasting its data out and you've seen that since we spoke last. The Roku deal, the Disney deal, which were identity deals, they were not necessarily inventory expansion deals that coincides with an increase accelerated growth. It's a really fascinating business model that they've assembled here and it seems like it's almost infinitely applicable to all the inventory everywhere. And CTV is obviously a big chunk of that. That's like a very high growth area of advertising at the moment.
- [14:18]
C
Yeah, that's exactly it. It's not necessarily inventory everywhere because the one place that Amazon is unable to bring these data sets is to social ads as well as Google search. But if we think of any place that is effectively in the quote unquote open Internet or pseudo open Internet and with CTV being the primary and TV more broadly being the PR category for both scale and growth right now and in the not too distant future, Amazon's done an incredible job of enabling third party partners to benefit from Amazon's proprietary first party data for both audience building as well as measurements. And I think this is a really important piece to understand in. Amazon views their competitors in CTV media buying as being the Trade Desk and DB360, Google's DSP. If we think about how Amazon can compete with these players, they compete with these unfair data advantages and they also compete with the fact that one of the most scaled premium CTV ad channels or ad placements is prime video ads which you can only buy on the Amazon dsp. So for many advertisers you have to come to the Amazon DSP to buy prime video ads. And if you choose to do so, Amazon's argument is that you should do so across all other premium CTV and centralize across Disney, Netflix, Paramount plus NBC. All of your TV media buy should be done through the Amazon DSP And Amazon across both their demand side tech and supply side tech. And Amazon publisher services have done an incredible job of expanding the possibilities of supply across all of premium CTV. And if you we had this discussion 18 to 24 months ago, I think a lot of folks would have said that Amazon's primary competition is the Trade Desk. And I think Amazon and both Google have done a phenomenal job in the last two years of creating existential doubt on the Trade Desk's very existence, given that it doesn't own any proprietary inventory or proprietary data. And so really, if you think about Amazon and Google competing against each other, it's YouTube as its linchpin on Google side to bring media buyers into DB360, and it's prime Video ads on Amazon side as its linchpin to bring people into Amazon dsp. And the positioning that Amazon's gone after relative to a. Google is saying that we are the DSP for premium CTV inventory, juxtaposing that with Google and YouTube, which people will say are cat videos and creators and all of this other junk. If you want to buy have a unified CTV strategy across all premium inventory, you would do so on Amazon. Conversely, Google will say how YouTube is actually CTV, it's premium. It's all of these incredible engagements and touch points that are unique to Amazon. But Amazon strategy is very much positioning itself not only in the US but globally because of Prime Video and because Amazon DSP is the only way to access Prime Video ads as the premium CTV DSP in the world.
- [17:31]
B
I want to hover here for a little bit. So Trade Desk is not a company that I follow super closely. Two years ago, three years ago, I remember I just started taking a look at the company. I just was asking, what's the moat here? Give me the steel man argument for this company being very successful. And I talked to a lot of people that I respected in the web space. And I just kind of went through my list of kind of what I thought were very systemic challenges the company faced. And people would say, yeah, but CEO is a brilliant guy and he'll navigate the company through this. And just yesterday I saw Trishla from Adweek. Trishla Oswald Trade just got a new cfo. And she kind of made the point. He's the fourth CFO they've had in a year.
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C
Not usually a great sign.
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B
Well, I just, I was like, wait a hold on. Like what? That's extraordinary. Like, I've never heard of that. And I, you know, has that ever happened? So I was just asking Grok and I went to. This is on Twitter. So I went to, you know, chatgpt. Is there a history of a company that was not extremely financially distressed or facing some sort of like regulatory intervention or something that had four CFOs in a year? Now, obviously one of those was interim, right? Which is okay, fine, because, because, you know, and the answer was no. The answer was just no. That's never. It was unprecedented. And I just thought, I just. That was just like a, that it felt like a detail that was maybe something that I, you'd expect. Like I. Again, I don't follow the company closely, but like, how is that not being talked about more? It felt like a pretty big revelation there.
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C
Yeah.
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B
I don't know, maybe I'm just reading too much into it.
- [18:59]
C
I think the decline of Trade Desk has certainly been a topic of discussion across the broader ad tech community for the past year. You know, there's the Hemingway phrase of how did I go bankrupt? And it was suddenly and then all at once. And so Amazon and Google, to their credit, have done an incredible job of arming their sales teams with ammunition as to why they should centralize their programmatic media budgets to both their platforms. And over the past three to four years it was slowly chipping away at it. And I think we're now in a position in which it's suddenly in all at once. We get exposure to CMOs and agency decision makers who are now just saying. I don't know why we're funneling any dollars through the Trade Desk, but at the same time, Trade Desk has built a phenomenal business in which billions of advertising spend and hundreds of millions of dollars, if not billion dollars of revenue are flowing through it. It is growing. It is not growing at the growth rate that it used to grow at. And it is unclear if it will ever achieve the growth rate and scale that it used to operate at that. But I think that one of the things that I've been particularly disappointed in the CEO's commentary towards the decline of their growth has been the shots that he's been firing towards Amazon, which are just categorically untrue in which they. He basically says that Amazon's DSP is not a priority at Amazon. Absolutely not true. Amazon's advertising business, as we just said, is going to get at, let's call it 30 billion in incremental revenue and it's going to come largely from the Amazon dsp. There are tens and thousands of people employed at Amazon ads, almost if not all of them, but a. I would probably say 60 to 70% of them are working on the Amazon DSP and not on site sponsored ads. Another comment that he often says is Amazon favors their own inventory. In particular, their sellers are always pushing prime video. This is categorically false. I don't know if I should say this, but just in working very closely with Amazon sales teams have actually been incentivized to sell non Amazon inventory over Amazon inventory. And the reason why, gets back to the comment that I was making earlier, is that Amazon's opportunity is to centralize all of one's TV buys under its dsp.
- [21:20]
B
Right, right.
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C
It's not going to do that if people are just coming for prime video. But if I can sell you Eric CMO of Brand X a couple media buys on Disney, then maybe I'll bring you in for all of your Netflix buys and maybe I'll bring you in for all of the future NBC and Paramount buys. And so Trade Desk CEO Jeff Green has for whatever reason underplayed the competition between Amazon and has categorically expressed falsehoods in the strategic element and the go to market motion of Amazon ads with respect to its dsp, which just doesn't make any sense. And so look, I think the Trade Desk will continue to exist. They've done a great job of ingraining themselves across large agencies and brands. There are aspects of the Trade Desk that allow them to have unfair advantages, particularly compared to Google and Amazon. Trade Desk offers log level data on impressions and people can match that back to outcome. So getting back to pharma as an example, pharma is a two sided marketplace to advertisers. They market to consumers and they market to healthcare professionals. And so a pharma brand needs to know the very specific impression that they bought to lead to a healthcare professional purchase. And at the moment you can't do that on both Amazon and Google, but you can do that on the Trade Desk. So the degree to which Trade Desk is open about their data and open with their data, particularly log level data, I think that you're going to see continued momentum for them to entrench their market share. But if you talk to any seller of Google and any seller of Amazon and you ask them who they go after and what budgets they go after, right now It's Trade Desk CTB budgets to be centralized to their own DSPs.
- [23:16]
A
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- [23:43]
B
What's the right way to think about Amazon's position in the digital economy? Because it's not any one thing. Right. It straddles a number of important roles. It's an rmn, it's a dsp. To your point, it owns its own CTV platform, it's got a retail platform. How should advertisers view its role? What should they seek to get from it?
- [24:00]
C
Yeah, Amazon's advertising business and Amazon's retail business sits at this incredible intersection between programmatic media and marketplace commerce. So Amazon's DSP is probably the fastest growing at scale dsp. Amazon's commerce business is the largest online store in the world. And there are compounding benefits to both of those existing. And so if you think about all of the current trends within broader digital advertising retail media, Amazon is by far the largest retail media business in the world. I think still to this day Amazon represents 70 to 80% of all retail media. CTV. Amazon's DSP is the fastest growing DSP for CTV buying as well as prime video ads by turning subscriptions on or advertising on by default is the most at scale ad supported premium CTV service in the world. Additionally, Amazon's commerce capabilities are only continuing to proliferate. The reach that Amazon is getting across other categories and again turning non endemic categories like auto into a pseudo endemic category is just creating more proprietary signals for Amazon to broaden its way scope across commerce more broadly. So Amazon sits at this incredible intersection of everything commerce and digital advertising. Now where are the spots? Where is Amazon's blind spots? You alluded to it earlier. Amazon does not touch social commerce to any meaningful degree. They have a partnership with Meta, but we haven't really seen much scale with Amazon's meta partnership. The inventory that Amazon has access to for its DSP is constrained relative to someone like a meta and a TikTok in which meta just has this unique ability to create net new inventory and monetize that inventory. Amazon's DSP is constrained by broader CTV which is still growing but is not growing to the rate that Meta is growing. And Amazon doesn't have all of this organic content that a Meta and a YouTube have to create net new ad inventory. So Amazon is coming from a position of strength. I think the path to getting close to 100 billion in advertising revenue is there. The growth rate is continuing. But if we look at the market share of global digital advertising, I think Meta just passed Google. That, that's been well known. Amazon coming up to that, that that second and competing with Google, I think Amazon is going to have some challenges with the current structure they operate in getting past 100 billion in revenue.
- [26:37]
B
Interesting because so Amazon's outgrowing search. I made a comment on Twitter yesterday because some account had said, oh, I can't believe Google's falling behind anthropic and OpenAI. And I just responded, they announced a billion MAU for AI mode at IO and search is growing 19%. Come on, are they losing here or do you not need necessarily the absolute number one model based on, you know, some benchmark to be winning? Like what, what is your definition of winning here? Because I'd say 19% year over year growth at that, at search scale plus a billion ma. A billion MAU in AI mode is. I'd call that winning, but. And then someone commented, well, is search and other is the line item. It's not just search. Oh, okay, yeah, sure. So you think Maps and Google Play Store inventory are dragging that growth number up? That's so pedantic and unhelpful. I hate it when people make those kind of comments. Okay, anyway, rant over, but talk to me about Chatbot inventory because I think that's something that people haven't spoken about. But Amazon invested in OpenAI. They did the deal. You referenced it, the deal with Meta. My hypothesis is they do account linking with Chat GPT that gives them the next social. They lost social. Let's admit it, they lost social. Twitch is not that big. It's kind of scaled, but they never really got not a toehold in social. Could this be the preempting, you know, the sort of the next social aggregation of attention? And that's what it is, is they get ads in ChatGPT. Could you imagine that happening?
- [28:10]
C
Yeah, something. Partnerships need to be forged between both ChatGPT and Amazon. And so if we think about Chat GPT and their future advertising ambitions, E commerce is largely going to be a significant part of it. And an e commerce product just simply doesn't work at scale without being able to have reliable e commerce data, inventory, catalog pricing, delivery that you get from Amazon. Amazon still represents 50% of total US E Commerce, a Shopify enabled ChatGPT Commerce product, is going to be simply niche. And ChatGPT doesn't win on scale. And ads and e commerce, it's niche, it needs Amazon. Conversely, Amazon's been investing in its own chatbot, as you know, as you've documented, Rufus. And so the interesting piece with Amazon is Amazon has this disruption dilemma that Google is also facing and that the lion's share of Amazon's advertising revenue right now, like Google, is on search. So people bidding on keywords or product skus on Amazon.com and so if people are spending less time on the path to purchase on Amazon.com, whether that be in a third party chatbot or whether that be in their own chatbot, then Amazon is losing potential advertising revenue. Now, forget about growth, but Amazon's actually losing their base of existing advertising revenue because people, people aren't clicking on as many keywords or viewing as many product skus as they normally would. So what Amazon's very astutely done is they've created sponsored prompts within Rufus. It's AI chatbot, and they're showing an immediate ability to monetize that the same way that Google is doing a great job of monetizing their AI answers within Gemini. And so I think that if you look at potential surface areas with which Amazon can dramatically expand its advertising revenue and advertising potential, OpenAI would definitely be the first place that I would look towards. And it's just unclear how that will materialize. Obviously, product listing ads within Amazon's ad tech stack could easily be extended to OpenAI. Amazon's DSP for display inventory could very easily be expanded to ChatGPT. But Amazon's going to want a very significant piece of that advertising revenue. And so OpenAI and Amazon, they're partnering with every single frontier model. Amazon partnering with all frontier models and except for Google obviously. And OpenAI is partnering with every cloud service provider. There's lots of partnerships. But the partnership that I obviously want to see that I think everyone is waiting on is what is the future advertising partnership between ChatGPT and Amazon. And I just believe that ChatGPT is going to need to open up some of that advertising inventory that they're creating to Amazon purchases, which will invariably lead to a significant amount of increased advertising revenue from Amazon. We just don't know when that will be or how that will materialize.
- [31:08]
B
Yeah, I mean, I don't want to revisit my agent. E commerce is a mirage, you know, dramatic kind of battle that I've been waging here because it's just not that interesting to me because I think it's over. I think this. We, like people say we're so early with agent commerce. No, we're not.
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A
It's over, Rufus.
- [31:24]
B
That's sparky. That's agentic commerce. It's on platform. It's on platform discovery. What people think that we're just on the cusp of Happened. It happened. Amazon won. Walmart won. Instant checkout. It was suboptimal on its face. And I wrote about this. The affiliate model was Suboptimal on its face for economic reasons, for incentive reasons. It was never going to work out. Independent agentic commerce was never going to work out. Out. And we're not at the cusp of this. We're not at the very beginning stages of this. We're not writing the Playbook. The Playbook exists. It's advertising. If Amazon, if Amazon, to your point, if Amazon never opened up its catalog, instant checkout was doa. It was never going to happen without Amazon participating. Amazon is too big. E commerce is too concentrated. So is advertising. You need cooperation from the largest entity in order to make anything work. And so now you're seeing, well, why did, why would Amazon do a deal with, why would they invest in OpenAI on the one hand? I mean, then they get, you know, a customer for a trainium, which, okay, sure, that's part of it, but the other part has to be that they are going to execute against the playbook that they've been executing against, which is to broadcast this identity spine onto a new surface area. They miss social, they're going to seize the opportunity with chatbots. And that's, that's, that's what this has to be. I'm, I'm almost certain of it. That's what this has to be. And so then that is the death of independent agentic commerce. Why? Because it demonstrates that that model is suboptimal. I can say it and I can scream it, you know, from the rooftops, like I did. OpenAI can shut down instant checkout after six months, which they did. You still have non believers, but the second they open up to advertising from Amazon, Amazon broadcasting its identity spine plus its own advertising infrastructure onto that surface area. Everyone else is going to say, okay, obviously that's a superior model and that's where all the chatbots are going to go. They have to. Right? And so like my sense is like that with agentic commerce. We're not in the early stages. We're not just discovering what's going to happen. It already happened. It's over. Like the Playbook has been written. And so, you know, I think what you see is like the scale chatbots, and there aren't that many, you know, Anthropic says it's holding out with Claude. We'll see. I think they're going to end up relenting, but this will be it. You partner with the biggest ad platforms, you partner with the biggest retail platforms and you accept their ads or and you build your own ad infrastructure structure because that's the superior economic model that's the dominant economic model.
- [33:47]
C
Yeah. And so the definition of agenda commerce just changes in that these chatbots just become the surface area with which people make purchasing decisions and they partner with broader E commerce platforms like in Amazon to execute those decisions, which is totally fine. Like, I think that people are still thinking it's a new category. So I wouldn't say it's dead per se, but the evolution of this will absolutely have to be partnering if OpenAI and ChatGPT have these grand ambitions of hitting $100 billion in advertising revenue, while the two categories that you need to have to hit $100 billion advertising revenue is CPG and E Commerce. And if you're unable to do that in digital advertising, if you're unable to hit those two categories, then it's going to be very challenging to build a meaningful scaled advertising business. And the quickest path towards advertising budgets on those two categories is to partner with Amazon and not just include gaining advertising revenue wallet share, but it's also gaining customer mind share of building habits to start your purchasing journey on OpenAI and Chat GPT. Because if those customer journeys and those shopping habits continue to start and exist primarily in Amazon itself, enabled by Rufus, then OpenAI ChatGPT will just continue to be a niche behavior for E commerce. And so a partnership definitely is something that we'd like to see.
- [35:11]
B
But tbd, you know those channels your
- [35:14]
A
colleagues keep bragging about? The ones getting all the credit?
- [35:18]
B
Yeah, they might be doing squat.
- [35:20]
A
Attribution makes every channel look like a
- [35:22]
B
hero, even when it's a zero.
- [35:24]
A
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- [35:43]
B
discount for the first six months. I read an interesting piece recently and I invited the author onto the podcast, so hopefully he'll be joining me soon to talk through it. But the author makes the case that big technological disruptions have historically pushed advertisers to agencies. So like, is that what you're seeing? And why do agencies and brands hire Gigi? Is it for that reason? It's like, look, we this is too disruptive, it's too frenetic, too dynamic. We'll let you be the experts on managing AI and all the applications to advertising. Like we make products. Is that a reasoning that you come across?
- [36:12]
C
I think that's a fair thing to say. Like many people say, agencies are like cockroaches. Everyone's been decrying the die the end of agencies for over a decade. I've been building ad tech for almost a decade and everyone has always said oh cool, you're building software products. So like this is going to kill the agency. And know that has never been the case. Agencies have strengthened their position within the categories that we've operated in over the past decade. So despite us building really great software products, invariably the customers of those software products have always tended to be agencies. Now that all that to say, I think there are two competing factors here. One, brands in housing is very much a trend. So if you look at total US advertising revenue, brands in housing, their media is at about a third of total media spend and it's growing in low single digit percentages and has been for the past few years to the detriment of hold code. So hold cos have been losing their market share. Independent agencies have been growing as well as brands in housing has been growing. Now you could make an argument to say that I will be a catalyst to increase the trend of brands beginning to in house. But even still, what does that increase look like? If it's low single digit percentages, does that get up to like mid single digit percentages and end up being at like 40% of US market share by let's call it 2028? That's still not the majority of advertising revenue. And so one the things that I believe to be true is that, and this isn't a unique perspective on my own, but kind of you alluded to it, whenever there is high degree of complexity and high degree of new and change brands hire experts to guide them on that journey of technological change and understand all of the variables at play of that technological change. So whether that be programmatic media buying, whether that be retail media, whether that be marketplace commerce, whether that be agentic AI, brands will effectively hire an expert which is an agency to perform the service of executing that media channel. We talking of media agencies right now to gain optimal results and provide that elevated level of service for them. If you think about the broader Trend within Agentic AI Right now many VCs are promoting the notion of AI enabled services, that services businesses are actually in this going to have this massive tailwind because services businesses that have historically had to operate on services margins in which they need to linearly scale headcount and team members as they scale revenue and customers could now theoretically exponentially increase customer and revenue while maintaining the same team, thereby operating more like a software company. And so that might be another tailwind that leads to agencies continuing to proliferate is that agencies are able to operate on a significantly higher operating margin and will be valued at a significantly higher multiple because of that margin margin. And so our perspective here is that we build great software products to enable our customers to achieve their goals, whether that be agencies or brands. It just so happens that we've started building on the Amazon dsp, which is largely controlled by agencies. And agencies have put up their hand to hire Jiji because they realize that Jiji is simply able to, one, dramatically reduce the operational cost of managing this media channel, and two, immediately improve advertising performance. And I'm not here to say like our AI is better than this person's AI for the advertising performance piece, but rather, it's actually quite simple. Heads of advertising at many of the agencies that we work with have effectively written playbooks to buy media and report on media. And these playbooks are often constrained with human hours in mind. And the human hours that actually get allocated to this are probably a fraction of someone's job. And so what we say to our customers is, hey, let's rewrite these playbooks unconstrained by human labor. So rather than thinking that a human can only allocate two hours of their data, this, let's assign this work to an AI agent, unconstrained, trained by human labor, in which AI is always on, always executing. And rather than humans arbitrarily deciding numbers for bids and budgets and bid adjustments, let's allow an AI agent to use a proprietary ML model to decide those numbers with a higher degree of precision and accuracy than the human could ever could, in a manner that's always on. And so, generally speaking, across our customer base, we just see immediate advertising performance improvements when they begin to adopt gg, because gigi's able to operate at a level of scale and precision that a human ever could. And so that's why agencies hire gigi. And we're really excited with where we're at, and we're really excited to continue to grow.
- [40:51]
B
What's the next frontier? So you started with Amazon. Where do you go after that? Amazon?
- [40:55]
C
Well, if you think about who our customers are, generally speaking, programmatic media buying teams at large agencies. And so it's in our best interest to ensure that we are touching as many surface areas that that team operates in. So if I talk to a of media at a large agency, now that we've been in market for over a year that head of media will now go to us and say like, okay, I get it, we're on board, we're bought in, we get it. Like Jiji has transformed the way that we work, but Jiji has unfortunately only transformed the way that we work on this one media channel and our teams operate on others. And so if we think about where the teams that use GIGI right now operate, it's the other enterprise DSPs that we spoke about, DB360 and Trade Desk are generally speaking the other surface areas that our teams log into. And so very naturally will begin to expand to those other enterprise DSPs so that Jiji becomes this orchestration layer across all three DSPs for any media agency and brand.
- [41:57]
B
But kind of going back to this idea of like, you know, this wave of disruption is unmanageable for like an in house marketing team. And so it actually almost counterintuitively pushes them into agencies. Maybe it's a tailwind for agencies. Is that a, is that a short lived, is that a short lived effect or is that a persistent effect? So like, because I think you can make both arguments, right? So okay, it's short lived because, well, they just need to get comfortable with the application of AI and all these different ways and once they do and there's all these SaaS tools and they'll be able to bring that back in house and there's less reliance on an agency. Or is it that? Well, no, now once we've given this task or this project to the agency, like there's, there's almost like a lock in like they have all the domain expertise and they've got our campaigns being managed in this way. And so I've, I've almost cut myself off from learning it. And so there's this, this kind of permanent dependence. Like which is it do you think?
- [42:48]
C
I think it's a little bit of the former. And on the latter piece, brands are smart, brands are able to straddle the lines that they're not dependent on their agency on a long term basis. But getting back to that initial point, complexity reads strength an agency strengthening their position with their clients. And brands are just continue to hire agencies across new degrees of complexity. I believe that AI and agentic AI will continue to be a tailwind for agencies at least for the next two to three years and three years and beyond. Eric, you know, we might be able to blink and buy a TV ad. There might be neuro links and CMOs in which you don't even need a team in three years from now. So I'm not here to opine on the long term, but at least in the near term, I think agentic AI and all of this complexity and new technology shift will definitely be a tailwind for agencies.
- [43:43]
B
Just as an aside, I saw a video on YouTube of a woman who had built this apparatus to control drones with her brain. It was fascinating. It's almost like scary. I don't want to say horrifying, but it was also like, very impressive. Okay, I've got two questions I'd love to get to both. Talk to me about shoppable tv. What's Amazon doing there? How is it progressing there?
- [44:02]
C
Shoppable TV is a niche behavior behavior and low single digit percentage point of conversion rate. And so shoppable TV would be buy a product, add it to cart or scan a QR code. And I think the notion that shoppable TV will become this ubiquitous behavior across TV media buying is immediately dispelled when you understand the low degree of market share that it's gaining even in Amazon's TV buying apparatus in which Amazon is, is by far the best possible channel for shoppable TV to become relatively ubiquitous.
- [44:41]
B
Right.
- [44:42]
C
It's very much a niche behavior. We recommend to our customers that they, for every TV ad that they begin to buy against that they have a shoppable creative and let the algorithm and let GG decide which creative gets shown the most based on conversion and engagement and the audience performance. But it's very much a niche behavior behavior and I think it's going to continue to be a niche behavior because we don't like engage with our TV in the same manner with which we engage on our phone. Like a common friend of ours, James Borrow at Universal Ads said something controversial and saying that that TV is actually the second device and the first device is the engaged device that we have in our hands and we don't want to shop on that second device, but the second device is there, it's changing purchasing decisions. And so I just continue to think that shoppable TV is very much a niche behavior. People will make investments in it because why not? But we're not going to see it become ubiquitous anytime in the near future.
- [45:40]
B
That's fascinating. So I totally agree with all that, especially the idea of the TV being the second device. And my sense is you don't need shoppable TV in order to do credible attribution here. You've got timestamps, you've got IP address because someone's at home on the couch, their TVs connected, it's connected to wifi, their phone's connected to wi fi, essentially have near nearly deterministic attribution anyway. And like to your point, like someone's much more familiar and accustomed to buying on their phone than they are with like their remote control.
- [46:12]
C
Exactly.
- [46:14]
B
All right, let's go to Live Ramp. So was that a defensive tactics we've been talking about the power of this Identity spine, was that a defensive tactic against platforms like Amazon? It's just simply expanding their reach to non platform inventory.
- [46:26]
C
I'm not an expert in Publicis strategy and Liveramp as a person product, but everything that I know about Hold Cos over the past three to four years has been generating profits on non services revenue lines, particularly around one principle based media buying and two proprietary audiences. And so if we think about Publicis audience spine, they have Epsilon which is their audience graph and they're able to mark up CPMs across all of their media buys by enriching the identity of Epsilon and making it ubiquitous across all of their buys. Now with Live Ramp they're likely going to have the ability to collaborate first party signals across brands, data across retailers, data across a variety of other like multi first party data, multi tenant first party data collaborations and mark up the fees that they would charge by creating proprietary audiences against it. I think that that's ultimately what it is and then package that as deals that they would have on their principal based media buying machine. And so what effectively this does is it strengthens their existing data layer across publishers, across media buyers, across brands to further monetize across principal based media buying and proprietary audiences. And that's my belief of why the Live Ramp acquisition was strategic for Poop.
- [47:57]
B
Adam, this was fantastic. This, I mean you're like the canonical MDM podcast guest because we just get to go really deep on a topic and everyone gains a lot of fantastic insights, including myself. Talk to the audience about Gigi. How can they interact with Gigi? How can they hire Gigi?
- [48:12]
C
Sure, if you are an agency or a brand who's buying Amazon DSP ads, we'd love to talk to you. Go to Gigi, Code AI and hire Gigi and you won't regret it.
- [48:23]
B
Adam, have fun at can.
- [48:24]
C
Thanks Eric.