Part 2: Amazon's Playbook Goes Viral

Welcome back to another Taking Inventory.

Last week we laid out how ads used to work. At least until Apple broke the model.

This week we’re going to look at Amazon, the one company that was unaffected, how they did it and how other businesses have taken notice.

Amazon’s Secret is Out

Remember that ads used to work by “observing” outcomes and using that to power an ad auction. And then Apple told ad supported businesses that they could only do this if they get permission from people. Well this broke the model that so many ad supported businesses had relied on for so long.

They say “necessity is the mother of invention” and because “observing” is necessary, this created an industry wide problem where ad supported businesses scrambled to come up with a solution. There were plenty of interesting ideas thrown around, but none that solved things quite like Amazon’s way.

Amazon ads had quietly been “working” for a long time, but now that the system was broken for everyone else and there weren’t any great ideas, people started taking notice.

It sometimes gets lost, but Amazon still did the hard part of building an ad supported model: you need to get a lot of people looking at a lot of (free) content that you control. It took decades and a lot of doubters, but they built up one of the most highly engaged audiences that we’ve ever seen.

Unlike most other social networks, however, Amazon took a different approach by actually decoupling users looking at the content from those creating it. Think about Instagram or Snap; if a viewer of content leaves, so does any content that those people were creating. Amazon built a resilient flywheel that included merchants selling goods (free content), consumers looking to buy goods (viewers), paid discovery (advertising), and facilitating the transaction (“observing action”).

The Payments Playbook and Its Imitators

Payments being a core part of the product (and owned by Amazon) was the key to avoiding the Apple reckoning. They never had to ask users whether they could spy on them because they do it all as part of their product and within their marketplace: create the inventory, serve the ads, and measure the outcomes.

A payment mechanism is what most other ad supported platforms are missing because their product was never intended to be a marketplace. Since Apple’s changes, however, nearly every platform is adding in some form of payments to build a product that does it all: create the inventory, serve the ads, and measure the outcomes.

A few examples worth point out are more direct Amazon competitors like Walmart, Target, or Kroger, all of which are building out more robust ad supported offerings. They had the inventory and the ability to measure outcomes, but only now are scaling their ability to serve ads.

On the other end of the spectrum are more traditional ad-supported platforms like Meta, TikTok, and Snap who have been adding more in-app commerce experiences to begin capturing transactions and measure outcomes.

This transition into a full ad and payment platforms is accelerating. Amazon demonstrated that this is how platforms can protect themselves and ensure their ad businesses can remain intact despite 3rd party interference (i.e. Apple).

What this means for all of us as consumers is that there’s a new way to “observe” what we’re doing. We’ll take a close look next week at how payments have become the new cookie and how it’s impacting industries from retail, consumer apps, and banks.

This Week On The Podcast: AdTechGod

Listen to Episode 24 of the Taking Inventory podcast. This week we spoke with @AdTechGod, the anonymous account that’s taking ad tech and marketing by storm. We get into the origin of the account, its purpose, and its prophecies.

Don’t miss our next episode where we sit down with Jackie Pimentel, Sr. Global Marketing Director at Meta. New episodes drop every Monday.

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