Ad buyers primarily see Amazon’s demand-side platform as a way to programmatically buy Amazon’s owned-and-operated inventory and target their ads using the e-commerce giant’s shopper data. Amazon is trying to broaden buyers’ views by pulling in higher quality inventory from outside publishers, including TV networks’ connected TV inventory, for advertisers to access through Amazon’s DSP.
Recently Amazon has been using its DSP and its underlying customer data to secure a foothold in the burgeoning connected TV ad market. In September 2018, the company began to require that ad-supported apps on its Fire TV connected TV platform provide Amazon with 30% of their ad impressions for Amazon to sell without providing publishers a cut of that resulting revenue. Since making that move, Amazon has been pitching ad buyers on using Amazon’s DSP to purchase that inventory, according to agency executives.
Additionally, the company has been running a test this year with a number of TV networks to funnel the networks’ Fire TV inventory into Amazon’s DSP. In the test, the networks are able to directly sell their Fire TV apps’ inventory to advertisers, and the advertisers are required to use Amazon’s DSP to place those buys, which gives the advertisers the ability to use Amazon’s shopper data to target their ads in the networks’ apps, according to two industry executives with knowledge of the matter. An Amazon spokesperson declined to comment.
Amazon appears to see connected TV as an opportunity to take a leadership position in a market that its main advertising rivals have yet to dominate. Facebook tried to erect a connected TV advertising network before shutting it down last year, while Google’s DSP has been making inroads in the connected TV market with the number of advertisers using Google’s DSP to run connected TV campaigns increasing by 137% over the past year, the company said in May 2019.
Amazon is effectively trying to create a connected TV advertising flywheel. If it can get more inventory from Fire TV apps, especially inventory from TV networks, then it stands to get more investment from advertisers into its DSP, which can help it to attract more and higher quality inventory from media companies. The engine spinning that flywheel is the access to Amazon’s shopper data. It’s a model that Amazon has previously used to get inventory from publishers for its DSP.
Attracting demand by accruing inventory
In December 2016, Amazon introduced its Transparent Ad Marketplace for publishers to auction off their sites’ and mobile apps’ display and video inventory. A header bidding tool, TAM enabled publishers to auction off their inventory to multiple demand sources simultaneously, including Amazon.
The primary lure for publishers to sell their inventory through TAM was being able to sell ads targeted based on Amazon’s shopper data because advertisers would likely pay more for those targeted ads and therefore publishers would stand to make more money.
However, for a publisher to sell ads through TAM targeted using Amazon’s shopper data, the publisher had to add at least one other demand source to TAM. “If you just wanted to use Amazon, then you wouldn’t get access to the shopper data,” said one publishing exec. That may seem counterintuitive for Amazon to require publishers to add demand sources to compete with Amazon, but it appears Amazon’s belief was that having multiple demand sources plug into TAM and the resulting competition for inventory would stand to make TAM — and by extension, Amazon — more valuable for publishers. Amazon appears to have been right in that belief.
Some publishers have seen TAM become a top-5 programmatic revenue source, according to two publishing executives. “They’ve rapidly made up a lot of ground in the header market and getting access to inventory and making a real business out of it,” said a second publishing exec. “But there’s a question now of how do they get into the premium marketplace?”
The answer appears to be, once again, Amazon’s DSP. In addition to the programmatic direct test with TV networks’ Fire TV apps, Amazon began testing programmatic direct deals for publishers’ online inventory purchased through Amazon’s DSP since last year, according to AdExchanger. In both examples, Amazon allows the publisher to own the advertiser relationship and serves as the data and technology provider, which publishers see as a win-win.
“The idea that Amazon data can be leveraged by a publisher to do business directly with a marketing partner and Amazon empowers that transaction in a privacy-compliant manner — to me that has a ton of value,” said a third publishing exec.
Media companies’ concerns
However, publishing and TV executives alike are concerned about giving Amazon too much power. They are wary that Amazon could use the advertiser demand that publishers funnel to its DSP to disintermediate media companies’ relationships with advertisers. This has already been a sore spot among publishers with TAM because Amazon does not share with publishers which advertisers are buying their inventory. “It’s only transparent on one side. The advertiser knows what they’re buying, but the seller does not know who’s buying them,” said the first publishing exec.
Even when it comes to the programmatic direct deals that Amazon’s DSP is facilitating, there is a concern that the arrangements could become a Trojan horse. For now, Amazon may use the deals to get publishers to provide it with access to higher quality inventory, and publishers may be comfortable with that because, in these programmatic direct arrangements, they are still the ones dealing with the advertiser directly. But Amazon could parlay advertisers’ adoption of its DSP to eventually revert publishers to the role of inventory provider.
“There is a risk that we’re creating a marketplace for them as TV content sellers,” said a TV network executive regarding the Fire TV test. “We’re getting buyers comfortable with using Amazon data in connected TV environments, and then Amazon over time will start to absorb those dollars back in and they’ll sell it according to their plans. Are we setting the market for them? Maybe, probably.”
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