Amazon is going in a big way into the online marketing business. Amazon has pulled out all the plugs to improve its gross margin.
According to Wall Street Journal, Amazon.com is in the process to enter the online advertising market and in the process lock horns with Google Inc who is running a $50 billion a year advertising business
Amazon’s new products will be much akin to Google’s AdWords which runs advertisements alongside search results which is based on keywords which are used by the user. Amazon is also creating a bulk buying tool for advertisers. The system will give a huge flip to the company’s ability to place ads on third-party websites. The product is expected to be ready for launch later this year. Amazon has already given presentation about the product before potential clients.
It will not be an easy task for Amazon since Google is well entrenched in the business and already has a 14 years head start which gives it immense clout to dictate pricing in the market. AdSense was launched in 2000 and the company has in its kitty more than a million advertisers who are competing for the finite ad space on the platform. This has upped the price higher and it meant that most publishers will prefer to go for the Google Platform than the competitors. Last year, the search-engine giant paid over $9 billion to third-party websites.
Amazon has an advantage though in comparison to Google. It is its experience as an online retailer and therefore it has a better understanding of the buying sentiments of its users. In the first quarter of 2014, Amazon has 250 million active users. Amazon could use this data to better understand the buying behavior and make the ads it runs more effective and relevant.