• by Laurie Sullivan  @lauriesullivan, February 1, 2018

Amazon, which is known for its technology and cloud services, has been building out an advertising business that many expect will soon rival Google's.

A patent filed by Jonathan Cohn, senior technical program manager for Amazon Go -- the company's grocery store that requires an app to enter and check out --  was recently issued for a wireless wristband that tracks the movement of workers through its warehouses and alerts them when it is time for a break. 

Teaque Lenahan, group director at Fjord, an Accenture Interactive design and innovation consultancy and one of the first consumers to shop at the Amazon Go prototype store in Seattle, said shopping at Amazon Go was "delightfully boring," but it will give the online retailer a way to learn about consumer shopping behavior in physical stores, and eventually, to integrate online data into the experience. 

The store sells pre-packaged dinners such as a box of ingredients and private-label Amazon goods and products from national consumer product goods companies similar to Whole Foods. "It worked so well that there were no hiccups," he said.

Lenahan says that although there are not many branding opportunities for national products, "it's very clear you're in an Amazon store with a tightly controlled message," adding that the technology is really invisible.

Amazon uses cameras, computer vision, sensor fusion and deep-learning algorithms similar to the technology built into self-driving cars. "With facial recognition and the amount of cameras, I would imagine the store could assess in real-time the facial reaction of the consumer when they respond positively and negatively," he said. 

The consumer uses the Amazon Go app to enter the store. Each time the consumer picks up an item, the price is tallied in the app. If an item is placed back on the shelf, the technology deducts the price. The items are charged to the consumer's Amazon account.

Late last year, an Amazon corporate communications senior manager described the company's advertising business in three units: Amazon Media Group (AMG), Amazon Marketing Services (AMS) and Amazon Advertising Platform (AAP).

AMS focuses on a pay-per-click performance marketing suite offering advertisers sponsored products, headline search ads, and product display ads. The platform also offers customizable "Amazon Stores" with URLs.

Today, Amazon's biggest profits come from cloud services in Amazon Web Services (AWS), but some predict this will change. JP Morgan's mid-January research note estimates Amazon generated $2.8 billion in ad revenue in fiscal 2017 -- and that figure could rise 61% to $4.5 billion in 2018, accounting for about 2% of the company's projected annual revenue this year.

While the company's fledgling ad business continues to thrive, analysts believe that estimate will rise to $6.6 billion by 2019, according to one source.