Let Them Use AdTech — Amazon’s Next Move to Control Online Retail
Senior reporter Karina Montoya expresses concern on Amazon’s new ad tech service strengthens its market control, potentially threatening retailer independence and raising concerns about data and margin manipulation.
Last week, when Amazon pledged a $100 billion spending plan in AI for 2025, it seemed to be following other tech giants in betting its future on these new technologies. But a closer look at Amazon’s plans show that the corporation remains very committed to driving growth through more traditional means — such as by licensing its online advertising system to other retailers.
In January, Amazon launched Amazon Ad Retail Service, a cloud-based platform that enables other retailers to sell targeted ads on their own websites using a version of Amazon.com’s advertising platform. At first sight the effort may not sound like a big deal. The tech giant has long devoted much effort to growing its advertising business beyond its own marketplace, as we’ve previously reported.
But this is the first time Amazon is offering an ad tech suite for other retailers with proprietary websites. In practice, this new service means specialty retailers can sell ads on their own websites to brands that are likely already selling products on Amazon.com and buying ads there as well. From Amazon’s perspective, the service simply makes it easier for other retailers to “enhance their shopping experience with highly relevant ads.”
But the picture is more complicated than that. The new line of business means that Amazon is now officially competing directly with ad tech providers such as Instacart, Criteo, or Publicis, which cater to what’s left of retail outside Amazon.com.
It also opens another front in Amazon’s competition with rival retailers, one that is likely to further lessen their independence and viability. Amazon for years now has profited by providing core services to smaller retailers — from warehousing and fulfillment to executing online sales. The latest move extends this model to the retail media market where retailers seek to sell targeted ads based on consumers’ shopping behavior. As is true of fulfillment services, this means Amazon gets deep insights into the business models and relationships of other retailers.
In certain respects, this launch mirrors the original online advertising power play by Google more than a decade ago, when it expanded its ad business from search to the rest of the open web. But Amazon today enjoys an even bigger relative advantage in selling ad-tech for retailers. This includes, in addition to its huge advertiser portfolio, its sheer dominance over the cloud services on which many retailers already rely.
This model is similar to an effort a few years back by the Washington Post — owned by Amazon’s founder Jeff Bezos — to license its Arc XP publishing software to other news organizations, as detailed in the Washington Monthly.
The move will further entrench Amazon’s control over retail media ads. The corporation already captures 77% of retail ad spending in the U.S., a market projected to hit $62 billion in 2025. The remainder is divided between Walmart, regional retailers, and potential new entrants, such as specialty retailers. Paul Drecksler, publisher of marketing newsletter Shopifreaks, told Open Markets that “the end-game” for Amazon is simple. It is “to own inventory they don’t control.”
Many observers and market participants view the effort as a clear conflict of interest. As Dresckler asked rhetorically in a recent LinkedIn post, “[Am I] effectively sending my advertisers to Amazon Ads console, where I’d ultimately be helping to build a retail media network that collectively devalues the ads on my own website, and instead just makes me another cog in Amazon's wheel?”
Amazon has tried to ease these concerns by insisting that neither Amazon Ads nor other Amazon businesses will have access to retailers’ information. This assurance is based on the fact that this new ad tech suite lives in Amazon Web Services, so ad sales data would be processed in AWS’s “clean rooms” that are theoretically designed to anonymize user data and shield it from access by other retailers.
But for Drecksler, the threat is even more fundamental. “What about [when] once Amazon reaches a certain volume of sales with retailers, it starts extracting margin? You pay a 50% fee plus the ads you have to buy” on the marketplace, he said, adding. “Bezos has said it before, ‘Your margin is my opportunity.’”
Despite concerns, specialty retailers such as Wee!, wellness marketplace iHerb, and party supplies vendor Oriental Trading Company, are testing this new service and claim to be optimistic about its benefits. Drecksler, for one, has his doubts. “There is no network effect yet,” he says. It’s simply that “companies are too scared to stay away.”
This article was featured in The Corner Newsletter: February 14th, 2025
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