• by Gavin O'Malley  @mp_gavin, February 8, 2006

Hoping to bolster its associate network, Amazon.com has begun testing an AdSense-like program that enables associates to host sponsored links from a third-party provider.

The sponsored links, which will show up alongside links to Amazon products, are based on keywords that appear on publishers' sites, or that site owners establish with Amazon. While some analysts see parallels between Amazon's beta ad program and Google's AdSense, it is not clear yet whether the programs will compete directly.

"The Amazon Associates team is beta testing a new offering called the Amazon Associates Sponsored Links Program," Amazon spokesman Drew Herdener said in an e-mail exchange with OnlineMediaDaily. "Associates who choose to participate in the program will receive sponsored links from a third-party provider that they can place on their websites alongside links to Amazon products."

Amazon's strategy, according to Herdener, is to strengthen its relationships with the hundreds of thousands of associate partners who drive targeted buyers to Amazon. "We believe that by working with a third party to provide Associates with links to relevant Web sites, in addition to products on Amazon, that we can help them make more money from their sites," he explained. "This will help us maintain long-term relationships with our Associates community that provides an important source of traffic to Amazon sites."

Amazon's sponsored links program came to light this weekend when Chris Beasley, an independent Web site publisher and SitePoint.com blogger, told his readers he had been contacted by Amazon about the program--first in mid-January, and again last Friday.

"An Amazon Associates spokeswoman explained that the program is more or less like AdSense," Beasley told OnlineMediaDaily by phone.

For his part, Beasley sees a direct conflict between Google's AdSense and Amazon's beta. "They're obviously going to be competing for the same ad dollars and space on publisher sites," said Beasley.

Indeed, Beasley said he had initially not planned on testing Amazon's program because it conflicted with his existing Google AdSense membership. "There's a clause in both contracts--Google's and Amazon's--that doesn't allow you to use more than one contextual ad program on a site," Beasley explained: "It's clear the companies don't want to pay to have their ads on the same page twice."

Google did not return calls for comment regarding Amazon's beta program.

Beasley, whose network includes over 100 content and ecommerce sites, said he has now agreed to test Amazon Associates' sponsored links program, but he is not yet receiving third-party ads.

Some analysts and members of Amazon's associates program are not yet sure what to make of the beta program. "It's a very lucrative market, but it's not clear yet whether Amazon just wants to add value for its associates or to create a network that would rival Google's huge network," said Jupiter Research analyst Sapna Satagopan.

Google's AdSense program--which allows the search giant to place ads on Web publisher sites, using technology to determine which ads are relevant to individual visitors--generated $799 million last quarter, making up 42 percent of its revenue overall.

Steve Rubel, a prominent blogger who recently signed up as an Amazon associate, questioned Amazon's strategy. "There's room for competition here--ultimately, whoever offers publishers the best rates will win--but I don't really get how this ties into their core business."

Notably, a report released Tuesday by Merrill Lynch found that both Amazon and Google have dramatically increased their spending on technology this year: Amazon increased spending by 62 percent, to $448 million, and Google more than doubled spending to $493 million.

Merrill Lynch Research Analyst Justin Post explained that the investment was necessary in order to remain competitive in an ecommerce world increasingly reliant on effective search technology. "Ecommerce companies, which are not oblivious to the threats posed by Google, continue to invest in search technology to provide a more competitive commerce platform and improve first and third part conversion rates."

Although it is not uncommon for Internet partners to compete--or for Internet competitors to partner--Google's existing relationship with Amazon is significant. Google not only supports Amazon's search function, but delivers sponsored links on its site based on a multi-year agreement the companies inked in mid-2003.

Amazon has not yet laid out a development time line for the beta program, which launched on Jan. 27, according to Herdener.