Amazon recently closed a deal with demand-site platform Triggit which will allow the e-commerce giant to expand its existing retargeting efforts and take advantage of the growing display market. (www.paidcontent.org, David Kaplan, 6/29/2011) Research analysts have noted Amazon’s current efforts to expand its display ad business and to even provide services to third-party sites. According to Macquerie Research analyst Ben Schachter, Amazon intends to use Triggit’s RTB system to match pools of profiles from Amazon’s consumer data with available ad impressions. From there, “Amazon will then bid on inventory and re-sell it as part of a targeted ad buy to third-party advertisers.” Schachter estimates the gains for Amazon from display to be non-GAAP EBIT margins in the 20-25 percent range” compared to its current 5-6 percent margins.
Two issues that arise from this retargeting system are those of privacy and of user interference. After Amazon acquired the online shoes retailer Zappos two years, as a result of retargeting efforts, customers complained about receiving the same ads repeatedly. For example, when consumers visited and browsed items on a website, if they made no purchase, they would continue to see ads from the same website; the purpose of this technology was hopefully to convince these users to return to the website they visited and purchase the items they browsed. After a series of complaints, Zappos adjusted the system to stop repeated ads.
Amazon is obviously in a great position to make display advertising a lucrative business, but it must be careful not to let retargeting efforts ruin the user experience and drive away customers who are annoyed by repeated ads.
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