Amazon’s stopped buying Google ads – what does it mean?
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Amazon’s stopped buying Google ads – what does it mean?

Ecommerce giant Amazon has stopped buying a “popular type of Google ad” according to an anonymous source that Bloomberg cites as being “familiar with the decision.” The ad space in question is the one right at the top of search results, where high-bidders pay to put “colourful, image-rich” ads that match the search in question.

They work like this: if you Google something like “best sneakers under $50”, you could find an ad to buy a pair of sneakers on Amazon for $49 at the top of the results page. These ads are known to be immensely effective, so why would Amazon suddenly drop them?

Amazon’s share price is up by 37% so far this year

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Source: Yahoo Finance

Amazon started buying these “shopping” ad spaces back in 2016 through online auctions, where it competed with retailers like Walmart for the coveted position. It saw instant, and impressive, returns on these purchases. Likewise, they were great sales for Google, which considers these ads in particular to be a massive financial success. So why break up a partnership that seems to benefit everybody? The answer may be in Amazon’s longer-term ambitions.

According to marketing firm Merkle Inc., which originally noticed Amazon’s disappearance from the bidding arena on April 28: “the widespread vanishing act observed over the last week point to Amazon itself pausing its Shopping campaigns.” Bloomberg cites another two anonymous sources that claim this is the case, so there’s little doubt that Merkle is correct – Amazon isn’t being outbid, it’s walking away from the auctions.

Does this signify a commitment from Amazon to ramp up its own digital advertising efforts? There’s no shortage of calls for that strategy from investors and professional marketers. Outgoing WPP boss Martin Sorrell even confessed at the beginning of the year that Amazon’s potential power in this space “kept him up at night.” Amazon is widely considered to be the “third man” in waiting when it comes to digital advertising, the first two being Google and Facebook.

Amazon itself declined to comment, noting that some of its subsidiaries still use Google Shopping ads. A spokesperson for the company said: "While we don’t comment on individual customers, it’s not unusual for advertisers to adjust their campaigns at any time for any number of reasons."

Amazon already competes with Google in cloud hosting, voice search services, and more. Is it about to add another rivalry to what looks like a growing list?

Dominion holds Amazon in its Global Trends Ecommerce Fund.

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