Amazon Has Big Plans In Advertising, But Agency Trading Desks Stand in the Way

Execs Intrigued by the Possibilities but Find It Unlikely Company Will Sell Data to Agencies to Combine With That of Clients

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For most of its history, Amazon has banked on knowing consumer-buying habits to fuel its tremendous growth. Jeff Bezos' company is now using its rich data on those habits to help advertisers all over the web market to the right customers at the right time.

The development makes it a potential competitor to internet heavyweights such as Google, which is also selling targeted display ads using audience data. Amazon already sells display advertising and product advertising on its own properties. But its recent hiring of Yahoo ad executive Seth Dallaire to run North American ad sales indicates that the company is getting more serious about pushing deeper into the digital-advertising business.

In recent weeks, Amazon has begun talking to executives from agency "trading desks" to gauge interest in its new service: audience extension. The desks use clients' consumer data to buy up space and target ads to large swaths of internet inventory.

Audience extension essentially means Amazon is tracking segments of its users as they surf the web, and allowing advertisers to reach those segments on and off Amazon.

To do so, Amazon buys ad inventory on third-party sites that its users visit and then resells that inventory to an advertiser for a premium. Amazon says that the product has been in the market for more than a year, but agency execs, who largely work in the trading-desk divisions of big media and digital agencies, said the company is just pitching them now.

It remains to be seen whether Amazon will give these trading desks what they desire: consumer-shopping data, which agencies can then marry with their own data to target ads.

Jeff Bezos' Amazon isn't yet saying how it will differ from other ad networks. Credit: Emile Wamsteker/ Bloomberg

All of the agency trading-desk executives who spoke to Ad Age for this article were intrigued by the prospect of working with Amazon because of its perhaps unparalleled insights across countless categories. But almost all of them said they'd be surprised if Amazon sold segments of its data to shops to combine with first-party data.

Instead, it seems that Amazon intends to package the media it buys on third-party sites with its own data and offer that bundle to buyers. This approach makes sense for Amazon. It should make more money by bundling data and media, and it is probably concerned with who gets its hands on its consumer data, both because of privacy perceptions and competitive concerns.

Amazon declined to make an executive available for an interview but provided this statement in response to a question about the possibility of unbundling its data-media packages:

"We are excited to work more closely with agencies and advertisers to connect their brands with the right audiences at scale. We believe this can best be accomplished by partnering directly with Amazon, and we believe our combination of data and media can help drive tremendous value for our advertisers." 

But it's hard for trading desks to see the differentiator in such a packaged offering, said Kurt Unkel, senior VP-director at the Vivaki Nerve Center, who recently met with Amazon executives. "It's kind of like any other ad network," he said. "And we'll just be seeing if their special sauce is any better than the others."

The argument could be made that Amazon is indeed better positioned than most to cook up a better sauce than competitors, if its own product-recommendation engine is any indication. The answer will come in the execution.

Still, the agency world holds out hope that Amazon's new product may become more of a data provider and less of an ad network.

"I'm very excited about the opportunity to work with them," said Megan Pagliuca, GM and VP-display media at Merkle, where she oversaw the trading desk's development and launch. "But I hope they take an open approach so Merkle can take its first-party offline CRM data and leverage that with Amazon's."

Of course, the trading desks have their own agendas. It's true that packaging Amazon's data with their clients' could lead to better results, but it's also much more lucrative.

Either way, Amazon is likely to build a healthy retargeting offering. Whether it amounts to more than that , though, may depend on the buy-in of these trading desks, which control more and more of the agency's ad buying.

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