Advertising Becomes Amazon's Newest Low-Price Weapon
There's no more customer-obsessed company than Amazon, which has long forsaken high profits in pursuit of giving shoppers the best possible experience and the lowest possible price. Now Amazon wants to make advertising the latest weapon in its arsenal.
Amazon isn't exactly a newcomer to advertising, but until recently its ad efforts existed in a sort of extended beta: mainly as a way for Amazon's suppliers to promote their products and, more recently, as a means to subsidize low Kindle prices. But now Amazon is going after agency business and brand advertising dollars as well. Last week it pulled the wraps off "Amazon Media Group," a world of owned sites, devices and a third-party network that can use Amazon's trove of purchase and browsing data.
Like everywhere Amazon plays, its ambitions in advertising are big. And as a global player that builds its own technology, the company is positioned to compete with the likes of Google, Yahoo, Facebook and Microsoft. We sat down with Amazon's global head of advertising, Lisa Utzschneider, to find out more about Amazon's plans.
Advertising Age: Can you give us a sense of how important advertising is to Amazon?
Lisa Utzschneider: I think the way Jeff [Bezos] would answer that is , if we think about Amazon in two worlds, one world is an Amazon with ads and lower prices. Another world is an Amazon with no ads and higher prices. Which one would we choose? I think nine times out of 10, or 10 times out of 10, we would take Amazon with ads and lower prices.
Ad Age : You've been selling advertising on a small scale for years; why wait until now to tell the world about it?
Ms. Utzschneider: This year Advertising Week is our coming-out in terms of sharing what our ad program is all about. For the last couple years we have been very focused on building a global scalable ad business and figuring out what it takes to create a great customer experience. We just didn't feel ready and now we do.
Ad Age : Can you describe the vision?
Ms. Utzschneider: Over the last couple years we have been building out an ecosystem. The ecosystem consists of several buckets: the first is running display across our owned-and-operated sites-- sites like Amazon.com, IMDB, Diapers.com and Zappos.com. The second bucket is what we call connected devices: Kindle, Kindle with Special Offers, Kindle Fire and mobile. The third component is Amazon's advertising platform. That gives marketers the ability to connect with Amazon customers around the web. The other important part of that is it's a true global platform. I have global responsibility -- I have teams in U.S., U.K. and Germany and we just launched in France, Italy, Spain and Japan.
Ad Age : If I sell products on Amazon, how does advertising work?
Ms. Utzschneider: If we sell a product on Amazon and we promote that product through advertising, that links to a product-detail page. What Procter & Gamble loves about that is they promote awareness that there's a consumable product on Amazon. Big CPG marketers want us to grow the CPG category with them. We're not just books and music; you can buy detergent or coffee or baby wipes on Amazon.
Ad Age : That makes sense, but what if I don't sell anything on Amazon?
Ms. Utzchneider: [Chrysler's] Town & Country came to us and said they want to connect more with moms who are spending time on Amazon. Now they are an Amazon Moms sponsor. A big reason they are doing that is we can give them insights into how moms are spending time on Amazon. It can be totally unrelated to cars.
Ad Age : Sounds like most of your business is with the brands directly and not through agencies. True?
Ms. Utzchneider: In the last 6 to 12 months we have started engaging with agencies. People want to hear what we have to say because we haven't been public about it. The agencies have been very curious. Our clients are asking them, "What should our shopper-marketing strategy be? What is our e-commerce strategy?"
Ad Age : Last month Amazon announced that all new Kindles would include advertising, which turned out to be controversial. What makes you think consumers want the ads?
Ms. Utzschneider: Kindle with Special Offers turned into our best-selling Kindle device. We are fanatical about monitoring customer feedback, especially at launch, because we want to get it right. With certain special offers you can purchase directly from the wake-up stream. We've seen a three-times lift in purchase intent. We had a very high brand bar and a high user-experience bar. With Kindle with Special Offers we literally have had customers who come back and say, "I want to add Special Offers back into my old Kindle that I bought."
Ad Age : Kindle buyers can opt out of ads by paying $15. Do you see Amazon using advertising to offer more discounted or free products?
Ms. Utzschneider: It's hard to say free or lower price or discounted. It's less [about] whether its free or not -- it's [about] whether it's the right customer experience. The way we view advertising is it has to be additive to the customer experience. It enables us to invest in other areas that are really important for customers. I think we've figured out that right model that enhances the customer shopping experience.
Ad Age : It seems like shopping data is Amazon's key asset. Do you share it with advertisers?
Ms. Utzschneider: We have pretty advanced targeting capabilities. They fall into two buckets -- one is lifestyle and one is in-market. Lifestyle is the broader part of the funnel and consists of categories like fashionista, gadget geek, mom or coffee enthusiast. Further down the funnel within categories -- has this person looked at consumer electronics products? That's the kind of audience segment information that we share.