Amazon Apologizes For Costly Errors Made By Its Automated Ad System

A seller of advanced gaming computers discovered Amazon had charged him thousands of dollars to advertise merchandise in California -- although he had stopped selling his products there due to state regulations.

Consumers could no longer order the products, but Amazon's automated ad system kept promoting the products and charged him to run the ads. 

That's what Rob Robinson, owner of Computer Upgrade King, told Bloomberg. He said that because he was charged for the ads that didn't generate sales, he made zero profit from November through January. 

Robinson also said Amazon initially denied there was a problem, despite flagging the issue for several weeks.

When Bloomberg took the issue to Amazon, the company acknowledged that Robinson and other "sellers paid for misdirected advertisements and that it was working to fix the problem."



Amazon apologized to Robinson and gave him a $15,000 refund, but reportedly that was a fraction of the $300,000 he asked for.

Approximately $10,000 of the seller’s advertising spend was associated with ad clicks in California during the past 12 months. Those were linked to products that could not be shipped to addresses in the state for compliance reasons. Approximately $5,000 of the seller’s advertising spend was associated with ad clicks that were linked to inactive listings in the last 12 months.

More than 85% of Computer Upgrade King’s products are eligible to ship in California. To determine the amount of the refund, Amazon mapped the viewable impressions and outcomes based on the past 12 months. That number was less than what Robinson wanted.   

The glitch affected a very small amount of sellers -- less than 0.00215% of ads in California that were linked to the products that could not ship to addresses in the state based on the California Energy Commission's requirements.

This was an isolated technical glitch. The company moved quickly to resolve and resolve it, and reimbursed affected sellers.

“We will similarly contact and refund any affected sellers, and are updating our processes to ensure any such ads are not charged going forward,” an Amazon spokesperson said.

Google and Microsoft have touted automated ad systems for years, suggesting that artificial intelligence (AI) and calculated data could not do a better job than marketers monitoring campaigns, but would augment any decisions they make to speed the process and free up time for them to do other things. 

Computer Upgrade King, which employs about 80 people, sells computers and accessories to gamers, mostly in Amazon’s online marketplace.

Last year, Amazon began sending Robinson letters stating that some of his products were “restricted from sale in certain locations, although they are permissible for listing on Amazon.” At that time, regulations governing personal computer power consumption were being implemented in California. 

Robinson told Bloomberg it was okay to sacrifice some of his sales there to avoid paying for costly lab reports for hundreds of specialized products he sells.

Subsequently, items were blocked from sale. However, the ads for those items continued to run.

This is not the first time Amazon has experienced this problem, reports Bloomberg. Rachel Johnson Greer, a former compliance employee at Amazon who left the company in 2015,  told Bloomberg that at the time Amazon was developing automated tools to ensure products sold on the site complied with state and local regulations.

Update: This article was updated with additional context around the ad systems glitch and statement from an Amazon spokesperson. 

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