Commentary

Will Amazon's AWS Destroy Ad Tech's Margins?

by Dave Morgan , Featured Contributor, December 1, 2022

More than 11 years ago, Silicon valley icon Marc Andreessen famously told us that “software will eat the world.”

Over these past eleven years, Amazon’s AWS has definitely proven to all of us the enormous advantages that massively scaled cloud-based delivery of software has, relative to those running software in their own hardware or on subscale clouds.

Tuesday, AWS announced that it is offering data clean rooms and analytics as a turnkey feature of its cloud.

Yep, two of the biggest drivers in the future of digital advertising and marketing -- analytics and privacy-protecting data matching, both in real time -- will now be just a simple configuration and button push away for AWS customers.

Much of the world of ad tech has lived on black boxes, opacity and commingled economics with buyers and partners, and been able to enjoy very attractive per-transaction margins (10%-90% -- but generally closer to the upper than lower). The driver? Claims of proprietary algorithms.

For sure, we’ve already seen big cloud services impact many areas of ad tech. Ad serving, creative delivery, hosted analytics, workflow automation and version control have all become simpler and cheaper with cloud delivery. But what happens when everyone can get the best algorithms in the world for almost free? That is where we’re headed.

How will we know that the AWS (or Azure or Google Cloud) ad serving or bidding or attribution algorithms are better? We will see it in campaign results. That will be super-easy for performance ads, and easier and easier for CTV and linear TV ads, particularly as retail media networks become bigger and bigger players in the media mix.

Will AWS (or massive cloud competitors) eat ad-tech margins overnight? No, it won’t. But I wouldn’t bet against it for very long. And advertising will likely win when that happens. What do you think?

2 comments about "Will Amazon's AWS Destroy Ad Tech's Margins?".

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Stewart Pearson from Consilient Group, December 1, 2022 at 10:56 p.m.
Dave

Timely, but I suggest you are missing the point.

1. AdTech (and MarTech) are ridiculously fragmented, without the professional standards, certifications, legal and fiduciary requirements of disciplines on which corporations spend less money than advertising. That their margins will be reduced is GOOD.

2. The Monopoiization of Marketing and Advertising is the real problem you highlight. Cloud software and automated algorithic applications will further entrench Amazon, Google and Microsoft's dominance. It will further squeeze innovation from our economy. This is BAD.

3. The marketing and ad industry needs a collegiate, concerted response under one conceptual umbrella as here:

https://www.linkedin.com/pulse/marketing-advertising-data-tech-etc-time-one-umbrella-stewart-pearson/

Reply

Dave Morgan from Simulmedia replied, December 2, 2022 at 8:49 a.m.

Stewart, we are in total agreement. I do think that fragmentation in adtech is a big part of the problem, that we need stronger standards and real enforcement, and that marketers have been on the losing end of adtech, and that commoditizing adtech in massive clloud services could be very good for marketers.