Fast Five Shorts | Amazon To Sell Ad Tech To Other Retailers - Omni Talk Retail

Summary5 min read

Omni Talk Retail Podcast Summary

Episode: Fast Five Shorts | Amazon To Sell Ad Tech To Other Retailers
Release Date: January 16, 2025
Host: Omni Talk Retail
Guests: Amazon Representative, Retail Analyst
Transcript Duration Covered: 00:00 – 03:14

1. Introduction

In this episode of Omni Talk Retail, the focus is on Amazon's latest strategic move to monetize its advertising technology by offering ad services to other retailers. This development marks a significant shift in the retail advertising landscape, potentially reshaping how retailers manage and execute their advertising strategies.

2. Amazon’s New Retail Ad Services Offering

The episode begins with an overview of Amazon's announcement regarding its new advertising initiative.

Amazon Representative [00:00]:
"Amazon aims to expand its advertising business by letting retailers use its ad tools in their stores. The new offering, called Amazon Retail Ad Services, allows companies to show, quote, contextually relevant ads in the right place at the right time, end quote, in search results, product pages and other areas of their site."

Key features of Amazon Retail Ad Services include:

Customization: Retailers can design, place, and control the number of ads displayed across their websites.
Measurement and Reporting: Access to Amazon's robust ad measurement and reporting tools.
Separate Operations: The service operates independently from Amazon's own retail platform, with retailers managing their data via AWS accounts.

3. Analysis from the Retail Analyst

The Retail Analyst provides a critical perspective on Amazon's new service, delving into the broader implications for the retail industry.

Retail Analyst [00:54]:
"I think this is a smart pivot for Amazon. I actually really like this..."

The Analyst elaborates on a conversation with Robert Joe from the Schwartz Group, highlighting essential insights into retail media networks:

Operational Challenges: Simply transferring advertising or media buyers from a retail environment to manage a media network isn't sufficient. Successful retail media operations require treating the business as both a retailer and a media company.

Retail Analyst [02:15]:
"You have to operate as a retailer and a media company... Macy's just not agile enough to do both of these things."
Amazon’s Solution: By providing Amazon Retail Ad Services, Amazon enables retailers to tap into advertising revenue without the immediate need to develop in-house capabilities. This partnership approach allows retailers to benefit from Amazon's expertise while exploring the potential to build their own solutions or seek alternative partnerships in the future.

Retail Analyst [02:50]:
"There is revenue, a lot of revenue to be made here if you can do this in the right way."

The Analyst acknowledges the potential drawbacks, such as data sharing with Amazon, but views the service as a valuable starting point for retailers to explore retail media opportunities.

4. Amazon Representative's Perspective

The Amazon Representative responds to the Analyst's insights, providing Amazon's strategic rationale and reinforcing the benefits of their new service.

Amazon Representative [03:14]:
"Your point about retail media is really interesting... being a marathoner and wanting to become a gymnast. It’s just a whole other thing that you've got to learn how to do."

Key points made by the Amazon Representative include:

Complexity of Retail Media: Transitioning to a retail media business is fundamentally different from traditional retail operations, likening it to switching from marathon running to gymnastics—requiring entirely new skills and approaches.
Synergistic Growth: The introduction of Amazon Retail Ad Services is part of Amazon's broader strategy to create a synergistic "flywheel" effect, where advertising services drive more cloud usage and overall growth.

Amazon Representative [03:30]:
"The flywheel just keeps on spinning... help out all the online retailers that need to place ads on their site because they want to place ads on their site and they want to do it effectively and they want to get money for it."
Strategic Fit: Emphasizes that expanding advertising services aligns with Amazon's core competencies and business model, ensuring sustained growth and increased market dominance.

5. Key Insights and Conclusions

This episode highlights Amazon's strategic expansion into the advertising technology space for retailers, presenting both opportunities and challenges for the retail industry.

Key Takeaways:

Empowerment Through Partnership: Amazon Retail Ad Services offers retailers a way to enhance their advertising capabilities without significant upfront investments, leveraging Amazon's sophisticated tools and expertise.
Operational Duality: Successful implementation of retail media requires retailers to adopt dual operational mindsets—balancing traditional retail activities with media-centric strategies.
Growth and Dependency: While Amazon's service provides immediate benefits, it also deepens the dependency of retailers on Amazon's ecosystem, raising considerations about data sharing and long-term strategic autonomy.
Revenue Potential: There is substantial revenue potential in retail media, and Amazon's offering serves as a catalyst for retailers to explore and capitalize on this opportunity.

Conclusion:

Amazon's launch of Retail Ad Services represents a pivotal moment in the retail industry, blurring the lines between traditional retail operations and digital advertising. By offering comprehensive ad tools to other retailers, Amazon not only diversifies its revenue streams but also positions itself as a pivotal player in the evolving landscape of retail media. Retailers stand to gain from enhanced advertising capabilities and revenue opportunities, but must navigate the complexities of integrating these services into their existing operations and consider the strategic implications of partnering with a retail giant like Amazon.

Notable Quotes:

Retail Analyst [00:54]:
"I think this is a smart pivot for Amazon."
Retail Analyst [02:15]:
"You have to operate as a retailer and a media company... Macy's just not agile enough to do both of these things."
Retail Analyst [02:50]:
"There is revenue, a lot of revenue to be made here if you can do this in the right way."
Amazon Representative [03:14]:
"It's just a whole other thing that you've got to learn how to do."
Amazon Representative [03:30]:
"The flywheel just keeps on spinning... help out all the online retailers that need to place ads on their site because they want to place ads on their site and they want to do it effectively and they want to get money for it."

This comprehensive summary encapsulates the critical discussions and insights from the episode, providing a clear understanding of Amazon's strategic move into retail advertising and its implications for the broader retail industry.

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Transcript3 lines

[00:00]
Amazon Representative
Amazon aims to expand its advertising business by letting retailers use its ad tools in their stores. According to cnbc, Amazon is letting other retailers use its homegrown advertising tools to run sponsored ads across their own websites. The new offering, called Amazon Retail Ad Services, allows companies to show, quote, contextually relevant ads in the right place at the right time, end quote, in search results, product pages and other areas of their site. Amazon said with Amazon Retail Ad Service, users will be able to customize the design, placement and number of ads shown across their sites, as well as use Amazon's ad measurement and reporting tools. The service operates on systems that are separate from its own retail business and retailers manage their data, no surprise via AWS accounts. And what do you think of Amazon's new retail ad service?
[00:54]
Retail Analyst
I think this is a smart pivot for Amazon. I actually really like this and the reason is because we had Robert Joe, will you help me pronounce his last name? Joe? I want to say Joe Jose is the basketball player that I cannot, who's my eternal enemy. Also, side note, my brother texted me last night and said that I, I said Jackson Smith, I said Najiba and it's, I did not pronounce it right. He's like Ann, you've got to get your sports people's names right. You said Jackson Smith and Najiba in the Seattle Seahawks video we did at Lee and Field. I did not pronounce his name right. Thank you for fact checking me a month later and Jokic is the next one that I'm going to get fact checked on. I am certain. But anyway, back back to the Schwartz Group. So we were talking to Robert yesterday and I thought it was so, so, so eye opening for me how he explained retail media networks. I think he's still one of my favorite interviews but the thing that he said is to be successful at retail media you cannot just take your like advertising or media buyers from your retail environment and then make them in charge now of your retail media network, which I think a lot of retailers were doing early on. You have to operate as a retailer and a media company. You are essentially replacing, you know, inline media that these media buyers used to to buy. And not all companies are designed to do this or agile enough. Gets back to what you're talking about Macy's. Like they're just not agile enough to do both of these things. So I think Amazon is providing a solution here that allows retailers like that to get into some of this advertising revenue. No, it is not ideal because yes, you're still working with Amazon and they're getting some of this information even if they say it's a separate business unit. But I, that this is still a good place for people to start to see the value that they can get from advertising like this Amazon, this Amazon ads capability and then figure out like, can we build this on our own? Do we need to find a partner? Do we need to join another network in order to be successful? Because there is revenue, a lot of revenue to be made here if you can do this in the right way. But what do you think about this, Chris?
[03:14]
Amazon Representative
Yeah, I mean your point, your point about retail media is really interesting because going back to the, you know, I think about what A and M said, like drawing the comparison to marketplaces, I feel like the analogy I would use is marketplaces is more akin to a retailer like, you know, say you're a crossfitter and you want to become a marathoner. Like, you know, it's, it's not a bridge to, it's not, it's not that different of a muscle use. But like the idea of standing up a retail media business in a lot of ways for retailers is like, you know, being a marathoner and wanting to become a gymnast. Right. It's just, it's just a whole nother thing that you've got to learn how to do. And so, yeah, I don't have much to add on this story. I mean the thing to me is just going back to what we said in the second headline, the, the flywheel just keeps on spinning. Yeah, I mean this is, this is, this is a, a page from the playbook we've seen a thousand times with Amazon selling its tax so you know, which in turn generates more cloud usage. The flywheel gets going which just keeps making Amazon more and more powerful with every single user. So, so if I was Amazon, I, I mean net net, I, I absolutely 100 be doing the same thing. And that's all I say. I mean it's a no brainer. Yeah, help out all the online retailers that need to place ads on their site because they want to place ads on their site and they want to do it effectively and they want to get money for it. Yeah, right.