Amazon could be the third-place advertising player behind Facebook and Google, if it stays out of trouble

Ted
S. Warren/AP

• Amazon is expected to become the third largest digital
  advertiser, behind Facebook and Google, according to eMarketer
  researchers.
• But as the company’s market share of the ad and retail
  business continues to expand, the company may run into the same
  kind of scrutiny that has dogged other large ad platforms, such
  as Google’s. 
• Some observers already see behavior that makes it
  difficult for smaller third-party manufacturers that sell
  through Amazon to compete.
• The retailer’s ad business is growing at a time when
  regulators in the US and Europe are taking a hard look at the
  business practices of big retailers and tech giants.

Researchers with
eMarketer tell the Wall Street Journal that Amazon could soon
become the third largest US digital advertiser, behind Google and
Facebook — an impressive benchmark considering ads are a side
business for the web’s biggest retailer. 

But as the Amazon continues to grow its ad business, it must
prove that it can avoid the same regulatory scrutiny that has
plagued other powerful ad platforms, such as Google search
and Facebook’s
social network. More specifically to Amazon’s core
retail business, CEO Jeff Bezos must be careful not to alienate
customers with the glut of ads that are now far more prevalent at
his web store.  

“There’s an interesting debate right now, about whether the ads
are customer-centric enough,” said Andrea Leigh, vice
president of client services at Ideoclick, a Seattle-based
ecommerce consultancy, in an interview with Business Insider.

Amazon representatives were not immediately available for
comment.

Researchers from eMarketer on Wednesday estimated that Amazon
will generate “$4.6B in domestic ad revenue.” The
research firm said that Amazon’s share of the overall market will
reach approximately 4.2 percent. That’s enough for the retailer
to overtake Microsoft and Oath, the Verizon-owned media
site, in digital advertising.

The two largest players, Google and Facebook, hold a combined 58
percent of the market with $64 billion, eMarketer says.
 Amazon’s $5 billion is tiny in comparison, but the
retailer’s ad business is
growing faster than either of the two frontrunners, according
to analysts.

Amazon appears to be ready to cut deeper into Google and
Facebook’s market share. Before that can happen, however, it has
to avoid the same regulatory hurdles that has at times tripped up
each of them.

The news of Amazon’s ad growth comes as lawmakers in the United
States and Europe are looking hard at whether some of the
business practices of big tech companies are
anticompetitive. Google has been accused multiple times of
tweaking search results to favor ads for its own products and
services over rivals.

Last year, the European Union hit Google with
a $2.8 billion fine after deciding the company had done
exactly this. Google is appealing that ruling.

EU
Competition Commissioner Vestager holds a news conference in
Brussels
Thomson
Reuters

Certainly, Google has a much larger share of search than Amazon
has of retail and market share is always a factor in how
regulators decide if a business is anticompetitive. But Amazon’s
share of the retail market continues to expand More than
half of all product searches occur on Amazon, Leigh said.

Amazon is starting to attract the same sort of scrutiny in Europe
that has dogged Google.
The Wall Street Journal reported on Wednesday that the EU has
begun a preliminary probe into how Amazon treats the merchants
that sell via its platform. One doesn’t have to look too deeply
into Amazon’s ad business to discover some eyebrow-raising
behavior, say observers. 

Keying in a search term for any product on Amazon and at the top
of first page of the search results will typically be stuffed
with ads. The ads belong to companies that  bid on and
purchased the ability to advertise in this all-important area of
Amazon site.

During a presentation at the Code Commerce conference
on Tuesday, Leigh told attendees that Amazon is
sometimes “predatory” in its advertising practices,
according to the HubSpot
Marketing Blog. She said Amazon will sometimes reserve the
 valuable real estate on its search-result pages for its own
private-label products, Leigh said on stage, adding that
sometimes Amazon will even display the ads on a
competing product’s detail page.

In an interview Wednesday with Business Insider, Leigh said: “It
used to be people would log on to Amazon and a good product with
a good price could go viral. Now, it’s all pay to play. It’s hard
for a brand without some financial means to compete.” 

When asked whether this was legal, Leigh said she was not a
lawyer or an expert at antitrust. She did, however, say Amazon’s
practices appear to be effective.  She said that Facebook
and Google and other players in the digital ad business “should
be afraid.”  

And as for the possibility that shoppers could be turned off by
the addition of so many ads at Amazon, Leigh said that this is
one of the big questions in the ad business. 

“Amazon bases their ads on how relevant they are to customers,”
Leigh said. “If ads are really relevant to you, do you mind? I
think that the answer is you don’t mind.”