‘Incredible advantage’: How Amazon’s Sizmek acquisition will address its DSP’s weaknesses

Over the past several years, Amazon has been working to establish itself as a rival to Google’s dominant digital advertising business. A major component of that effort is the company’s DSP, which is the only DSP on the market that can use Amazon’s customer data to target ads. That data and the ability to advertise to people on Amazon’s owned-and-operated properties “gives them an edge to some particular brands, regardless of how behind their tech may be,” said Rahil Berani, vp and director of programmatic at Digitas.

An Amazon spokesperson did not respond to a request for comment by press time.

Amazon’s acquisition of Sizmek’s ad server may give the company even more of an edge among advertisers at a time when Amazon’s ad revenue growth is decelerating. As the name suggests, an ad server is used by advertisers to decide which ads to serve on publishers’ properties. That means the ad server has a view of everywhere an advertiser has ads running online, including ads that are purchased programmatically as well as those bought directly from a publisher. “Typically your direct buys will be imported into your ad server so you have a holistic one-stop shop from a reporting perspective,” said one agency exec.

Being able to see an advertiser’s direct buys would give Amazon a view of the digital ad market that it otherwise would not be privy to because it would be able to see “every single detail of the buy, including rates,” said a second agency exec, who works at an agency that uses Sizmek’s ad server. However, it’s unclear how much of that information Amazon will actually have access to. According to a former Sizmek exec, Amazon will only be able to see rates in the ad server if an advertiser or agency allows it.

While Amazon said in a company blog post that Sizmek’s ad server will operate separately from Amazon’s advertising business “for the time being,” industry execs widely expect that Amazon will eventually link the ad server to its DSP. Given the upside for Amazon in doing so, it would be surprising if the company didn’t connect the two ad tech products.

Combining a DSP and an ad server “enables you to de-duplicate campaign activity, individual measurement, manage reach and frequency, manage conversions across traditional buys and your programmatic buys,” said Ari Paparo, CEO of ad tech firm Beeswax.

Ad server as a source of truth
Being able to attribute ads to business results, like product sales, has been among the biggest pain points for advertisers. Amazon has taken note of that with its attribution pixel that is meant to gauge how effective ads off Amazon’s sites are in getting people to purchase a product on Amazon.

Advertisers are generally wary of Amazon’s attribution tool because of the concern that the platform is effectively grading its own homework — true of its competitors, including Facebook and Google. Sizmek’s ad server can address these concerns because ad servers are considered to be a source of truth that is objective compared to a platform’s internal reporting systems, according to agency execs.

Given the broad view that an ad server has into advertisers’ campaigns, Amazon could use the ad server data to broaden its ability to attribute ads.

“This Sizmek acquisition is going to really help them to attribute back everything that runs on their platform and runs through the ad server to be able to attribute back to their own domain. I think that’s an incredible advantage. I think that’s what they were lacking to bring on clients,” said Kolin Kleveno, svp and head of programmatic at 360i.

Amazon DSP deficiencies
Agency execs’ descriptions of Amazon’s DSP range from “pretty basic” to “not super robust” to “okay” to “lacking.” The biggest complaints with Amazon’s DSP are that it is too difficult to use and does not provide the deep level of reporting that advertisers and agencies expect from a DSP.

The DSP’s user interface is not very intuitive and too complex for an inexperience programmatic buyer or an analyst to navigate, according to Berani. The overcomplicated interface is a major sticking point to using Amazon’s ad tech, according to one brand exec.

The interface is far from the only sticking point. Before Amazon updated its DSP within the past month, if an advertiser wanted to extend a campaign’s duration after it had started running, they would have to create an entirely new campaign, according to the second agency exec.

Additionally, the DSP does not provide advertisers with the log-level data that ad buyers increasingly crave in order to have more transparency into advertisers’ campaigns and for agencies’ data science teams to do the advanced analytics necessary to fine-tune their clients’ programmatic buying strategies, said a third agency exec.

Amazon does share aggregated data with advertisers. However, the delivery of the data “is very much delayed, so we’re not able to pull the reporting accurately from the previous day until 11 a.m.,” said Bradley Nunn, svp of technology strategy at Varick. By comparison, other DSPs such as Google’s and AppNexus typically send those reports around 7 a.m. eastern time, which means that Varick’s growth managers cannot see Amazon campaigns’ performance until four hours after they have begun to process the other campaigns.

Despite those deficiencies, Amazon’s DSP allows advertisers to access Amazon’s first-party user data. That makes it “a pretty easy sell to clients because it’s the only way to reach those audiences,” said the third agency exec.

Competing with Google’s ad server
Google’s DoubleClick Campaign Manager is considered the most widely used ad server among advertisers and agencies by a large margin. “I don’t think any server really touches DCM,” said Nunn. Sizmek’s ad server is considered the next best option, though it’s “not as robust as DCM,” according to one agency exec.

However, while Sizmek’s ad server is not as seamless to use and does not have as many integrations as Google’s ad server, it has had one advantage over Google’s ad server: dynamic creative optimization, a fancy term for technology that uses data to pick out the right ad to server to an individual person on the fly. If an advertiser is using Google’s DSP and ad server, they probably have to rely on third-party DCO technology, said Berani.

Advertisers have taken an increased interest in DCO because they recognize that tailoring a message to a particular context, such as the time of day and whether someone is on the go or at home, can make the difference between whether someone overlooks an ad or clicks on it to purchase the advertised product. “The creative side of programmatic has been a little bit of a forgotten animal,” said Sean Corcoran, U.S. president at MullenLowe Mediahub Global.

Sizmek’s DCO capabilities would pair well with Amazon’s ability to recommend products to people based on their purchase histories and other information that Amazon has on its customers. “It would be an easy win for them to show the value of their shopper data,” said Kleveno.

Convincing advertisers to switch servers
Amazon would appear to have a strong case to make in trying to convince advertisers to adopt Sizmek’s ad server. Nonetheless, it faces an uphill climb, as evidenced by Facebook’s ultimately failed attempt to convince advertisers to adopt its Atlas ad server. “Switching an ad server is like an infrastructure change,” said the first agency exec.

Amazon may also be forced to carry the baggage that advertisers levy on walled gardens in general. Many of the gripes that brand and agency execs have with Amazon, such as a lack of transparency in its DSP’s reporting, are the same complaints directed at Facebook and Google. As a result, advertisers could use Amazon’s efforts to sell them on its DSP and Sizmek’s ad server to try to keep at least one of the walled gardens in check. “Amazon and Sizmek clearly want to go more head to toe with Google, but they’re just taking an ad server and putting it into another walled garden. I don’t know how advertisers are going to accept that,” said the third agency exec.

Convincing advertisers to switch from Google’s ad server, in particular, would be a challenge for Amazon, according to agency execs. Google’s ad server is at the heart of its entire ad tech stack. The majority of advertisers that use Google’s ad server use its other ad tech products, said the third agency exec. “That’s the whole benefit of being quote-unquote integrated. If you strip out the ad server, what’s the point of [using Google’s DSP and analytics tool]?” this exec said.

Amazon’s intention could very well be to make advertisers choose between its ad tech stack and Google’s. However, it doesn’t have to play a zero-sum game. The rise of walled gardens like Google, Facebook and Amazon has met with the decline of the tracking cookie to fragment the digital ad landscape to the point that, for advertisers and agencies, needing to support multiple ad tech stacks is becoming no more ridiculous than needing to use multiple DSPs. “It’s becoming harder and harder to have a true holistic view,” said the third agency exec.

All Amazon really needs to do is to make a strong case for why it should be in the mix. Then, once in the mix, it will need to prove how much value it is able to deliver compared to the competition in order to steal a larger share of advertisers’ budgets.

“I don’t think there’s going to be that pure de-duplication where there’s one ad tech stack to rule them all. I think the other changes that are happening in the industry are going to prevent that from being the case,” said Kleveno.

Seb Joseph and Kristina Monllos contributed reporting.

This article has been updated to reflect that Amazon’s attribution pixel gauges how effective ads off Amazon’s sites are in getting people to purchase a product on Amazon.