Commentary

Amazon Might Nix 'Unproductive' Ads, TV May Not Have That Luxury

TV networks don’t forbid advertisers from buying a media schedule on its networks if the products or services are unprofitable. That's not for them to decide.

But for Amazon -- a new kind of media platform -- it’s a different story. According to CNBC, Amazon will be denying marketers from buying advertising on its platform if the product/service is “unprofitable.”

Now define “unprofitable,” according to Amazon.

Read this to mean if Amazon doesn’t make money on these products, expect the heave-ho for your ad campaign. That said, manufacturers might just do the obvious -- submit a better overall product cost deal for Amazon.

Here is where the issue around “business outcomes” guarantees comes front and center -- something slowly being offered by a select few TV networks.

For TV, this move isn’t a good idea. Networks wind up being responsible -- in part, but not wholly -- for say, how much Pantene shampoo is sold via a Procter & Gamble media campaign.

But for Amazon, it gets money a couple of different ways -- as a distributor for actual sales of product and, increasingly, as a platform where marketers buy digital media advertising time, mostly to support the many products and services sold on Amazon.

CNBC gives one key example: If a $5 water bottle costs Amazon $5 to store, pack and ship, the maker of the water bottle won't be allowed to advertise it -- because Amazon gains no profits.

So Amazon will turn down advertising. (We can sense veteran traditional TV advertising sales executives already rolling their eyes.) Well, sure, Amazon is in the driver’s seat; it is projected to see a massive 50% rise this year in advertising on its platform. Last year, it pulled in $10 billion in ad revenues.

Did any TV network groups see advertising revenue rise 50% last year? That’s the point.

And yes, TV networks do turn down advertising for pricing reasons and content concerns. But not because the TV network isn't making money on the actual selling of marketers products/services.

Many think it's wrong-headed for TV networks to offer business outcome guarantees for marketers when much is out of their control -- distribution, retail, product quality — as well as other media schedules that don’t run on their airwaves.

Amazon has much of this under control, and many product manufacturers  believe this kind of vertical integration is a good deal. But, long-term, what does this really mean for marketers’ control?

2 comments about "Amazon Might Nix 'Unproductive' Ads, TV May Not Have That Luxury".
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  1. Ed Papazian from Media Dynamics Inc, March 22, 2019 at 10:48 a.m.

    Interesting subject, Wayne. As I understand it, Amazon often turns down product sellers if it feels that they dont generate enough sales volume---hence it's not worth the trouble to carry them by Amazon. If this approach is applied to would be product marketers who wish to advertise on Amazon, --which is what it sounds like---this is a vast departure from how traditional media operate. In the latter case, it's none of the media ad seller's business how many sales the advertiser makes---all are welcome---- big and small. Amazon needs to rethink its double revenue stream business model for brands who want to advertise with it as well as sell products. Is Amazon an ad medium? Or is it a marketing/sales medium? If it tries to be both can it operate only by the marketing/sales rules or will that set up questions about monopoly control over distribution channels and related issues that invite federal intervention?

  2. Paula Lynn from Who Else Unlimited, March 22, 2019 at 8:51 p.m.

    Small businesses are cooked. Democracy is over.

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