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Amazon wants a bigger slice of the DSP ad tech market

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Amazon’s bold ask of advertisers: Don’t just dabble, go all-in on us for your programmatic ads.

The tech giant is trying to persuade advertisers to use its ad tech to buy ads from other publishers, not just on its own media. It’s something they’ve been able to do for a while, but Amazon’s ad executives are really emphasizing it these days.

So much so, in fact, that the ad tech, known as a demand-side platform, has become a focal point of conversations Amazon ad execs have had with advertisers in recent weeks about buying ads on Prime Video.

However, it’s the interactions with ad tech vendors in recent months and weeks that hold the most weight, underscoring Amazon’s unwavering determination to solidify its position as a dominant force in the programmatic ad arena.

That’s the view, at least, of several ad execs who have had those discussions. They’ve chosen to speak anonymously to Digiday about them, fearing any repercussions on their affiliations with the tech giant.

From these conversations, it’s apparent that Amazon is looking to broker deals and develop partnerships with ad tech vendors who can help the company make it easier to buy ads beyond its own ecosystem that aren’t banner ads — i.e. in-app and CTV. As one exec explained, “Amazon is making a big investment into the sort of deals with supply-side platforms (SSPs) that can help it secure better access to premium inventory that isn’t banners.”

These deals typically involve the arrangement of “connecting Amazon demand at a low fee for high signal integrity with various sellers,” according to the executive. This essentially translates into striking deals with ad tech vendors to secure special pricing in exchange for preferential treatment.

But these deals aren’t simple — they demand technical prowess. Amazon has had to upgrade integrations with SSPs to enhance signal capture for in-app and CTV inventory, offering advertisers more buying options and potentially boosting performance.

Another ad tech executive further elaborated on this point: “Amazon is making significant investments in deals. The collaborations we’re undertaking with them are primarily focused on in-app and CTV. The objective is to elevate the product to a level comparable to other DSPs that cater to a broader range of marketers and budgets.”

For all the discourse around SSPs being disintermediated by the largest DSPs, these talks show the resilience of the largest ones with direct publisher ties. Yes, Amazon’s DSP might seek direct integrations with very large publishers that are strategically valuable, but fundamentally, SSPs are still vital to the economics of its DSP. They’re a single point of integration, a single bill to pay, and they provide isolation from having to deal with publishers en masse.

SSPs seem equally pragmatic about what they’re about to embark on with Amazon. They know there’s an inherent risk in working with such a massive entity, but they also feel more secure, believing there’s less chance of being blindsided.

For instance, Amazon has always been very selective about the ad tech vendors it buys from, so the idea of the tech giant consolidating its buying power into fewer but better paths to programmatic inventory is something these SSPs can hedge against and not be caught out by. Similarly, while Amazon does work directly with many publishers, it has managed to maintain a positive relationship with SSPs, leveraging services like Amazon Publisher Services and its Transparent Ad Marketplace without disrupting their operations significantly.

All of this is a roundabout way of saying Amazon’s big pitch to the SSPs is rather timely. They’re frustrated about their reliance on a handful of DSPs and the loss of margin that comes as a result of that. Amazon promises a reprieve of sorts, and it’s hard to imagine the retailer-cum-ads business doesn’t know it.

Given all of this, it seems like Amazon is on to a winner.

Access to quality data and premium inventory are the two most important things marketers look for when deciding what DSP to use. Amazon checks both of those boxes, making it an easy choice for marketers — or does it? Marketers are, after all, creatures of habit, who have a very specific view of what Amazon’s DSP should be used for: to buy Amazon ads. And even the ones who don’t subscribe to this view, who do use the DSP to buy ads beyond Amazon’s ecosystem, do so in a very limited way. Normally, they’re already running campaigns across Amazon, and then just extend it to other sites outside of it. That’s fundamentally different to how an advertiser would use The Trade Desk or Google’s DV360.

This is where advertising on Prime Video becomes crucial.

If Amazon’s ad executives can successfully convince advertisers to use the DSP for purchasing these ads, there’s significant potential for increased spending over time. They’re already engaging with existing advertisers on this front, highlighting the effectiveness of the Amazon DSP in targeting across the marketing funnel, particularly in contexts like “Thursday Night Football” and other biddable CTV environments. The pitch is simple: If the DSP can drive successful outcomes in these environments, why not consider expanding its use further?

“Advertisers won’t jump ship right away but Amazon will be able to draw more interest over the long term given its strategic shift and the resources it’s devoting to more promising segments,” said Sky Canaves, senior analyst of retail and e-commerce at Insider Intelligence. “Ultimately it will come down to how well they can drive advertiser performance through new initiatives such as the Amazon Publisher Cloud, the updates to the DSP and ongoing AI investments to supplement the already strong first-party data and targeting capabilities.”

The re-emergence of Amazon’s DSP has been in the works for a while.

Over the last year or so, ad execs have noted how much the ad tech has changed to become omnichannel in nature — i.e. more of a competitor to the two largest DSPs: The Trade Desk and Google’s DV360. From the way the dashboard looks to it actually being connected to the Amazon Marketing Cloud measurement solution, it has undergone a complete makeover.

This task would pose a challenge for any DSP, let alone one that isn’t renowned for being at the forefront of innovation.

In fact, ad execs were once of the opinion that its complexity and inability to deliver the expected comprehensive reporting hindered its effectiveness in the past. Amazon was always going to address that at some point. The economics of running a massive ad tech business demand it. Especially for a DSP, where success is predicated on being able to relentlessly boost impression volume to lower marginal costs and compete more aggressively with rival technologies on price. There was only so long Amazon could do that with its own ad inventory, especially now that there’s pressure on advertising to help make the tech giant’s streaming service a large and profitable business.

“There was a sense from a lot of operators that the Amazon DSP wasn’t on par with other DSPs, especially when it came to CTV,” said Sam Bloom, head of partner strategy at PMG. “Amazon took on all that feedback and now those same operators tell us that the product is a lot better now.”

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