For retailers, Amazon is a true frenemy

That seems to be the crux of the issue — one that might challenge Amazon’s big ad ambitions.

Amazon could be poised, according to Forrester analyst Collin Colburn, who published research on this in January, to take over search — a market Google almost wholly controls. As consumer behavior shifts to be more specific, people will start searching on Amazon for specific needs. Amazon has created product display ads and other types of search products already. Plus, as Digiday has reported, Amazon is poised to take on the duopoly of Google and Facebook through moves for publishers as well.

Amazon’s latest earnings report, posted in February, found that its “other” revenue — which would most likely indicate digital advertising — grew 60 percent in 2016 to $1.3 billion. (This is still small compared to Google’s $80 billion ad revenue.)

Those kinds of moves have made agency honchos like WPP CEO Martin Sorrell see Amazon as a sleeping giant and a potential third force.

One apparel retailer who spoke to Digiday under the condition of anonymity said he has stayed away from Amazon precisely because to him it feels like a double-edged sword. “Amazon has not been a great partner,” he said, saying the idea of the conflict of interest is real and often leads to a feeling that it’s “bullying brands into utilizing their platform.” Furthermore, if a brand isn’t on Amazon, it will find someone else with the intent of knocking that brand out.

Speaking on stage at May’s Digiday Brand Summit in Berlin, Germany, Ethelbert Williams, CMO of InstaNatural, a beauty brand big on Amazon, said Amazon is a frenemy from a pricing standpoint — and in those categories, if you don’t exist on Amazon, you simply don’t exist at all.

At the same time, if brands want to be on Amazon for the purpose of using only its marketing (which buyers and brands both say is good), then they also have to be on its marketplace. “Amazon is two-way relationship,” said one marketer.

“I think there are plenty of reasons as a retailer to be scared of Amazon. The fact that they sell advertising isn’t one of them,” said 360i chairman Bryan Wiener, whose agency is now building out an Amazon practice in recognition of the company’s growing strength. “Amazon advertising is in support of selling goods to their marketplace. It’s in support of that — it’s very analogous to what happens in physical retail stores.”

The issue for Wiener is how little data Amazon is willing to share with merchant brands and how to deploy media dollars most effectively on that platform, which also happens to be an existential threat to many marketers out there. “They’re a frenemy,” he said.