Amazon’s venture into offering its advertising technology to other retailers has sparked debate. With Amazon already controlling a substantial share of retail media spending, this move could be seen as inviting competition into its arena.
The Audacity of Amazon’s Proposition
According to eMarketer, Amazon holds roughly 75% of retail media spend. The company’s history of retailers avoiding Amazon’s AWS cloud hosting technology due to competitive concerns further complicates the proposal. Despite these factors, Amazon may find partners, especially among smaller and mid-sized retailers. These retailers are looking for ways to jumpstart their own retail media aspirations.
The Bull Case: Advantages for Retailers
The potential benefits of Amazon’s “Retail Ad Service” are significant. The first key advantage is access to Amazon’s vast network of advertisers. iHerb, a beta partner, already shares 1,200 advertisers with the platform. “This innovative solution and proven technology allow us to deliver more relevant and personalized ads to our shoppers,” says Neil Folgate, SVP of Global Marketing at iHerb.
Another benefit is the access to an effective technology stack. Amazon has built up a $50 billion advertising business. Access to these tools could level the playing field for other retailers. Amazon also offers access to a massive portfolio of advertisers, which generated $14 billion in revenue for the company in Q3 2024. Retailers consequently get a running start with advertisers already prepared to invest.
Instacart’s Carrot ads platform offers a successful precedent. It shows how a potential competitor can become a valuable infrastructure partner for retailers. Thrive Market, The Fresh Market, and Schnucks have partnered with Carrot Ads.
Data Concerns and Competitive Risks
Concerns about data are a significant factor. “Amazon isn’t just selling AdTech – it’s selling dominance in the retail media ecosystem,” says Mikael Brakker, L’Oréal Luxe’s Europe Zone E-Commerce Director in a LinkedIn post. “You can be sure they’ll weaponize the data,” he warns.
Retailers such as Walmart, Target, and Kroger currently avoid using AWS to host their websites for competitive reasons. Even though Amazon promises to keep retailers’ data separate, via the use of clean rooms, the decision may prove too risky for some retailers to try the new service.
A Question of Scale and Strategic Adoption
The opportunity may separate along size lines. “The big question for retailers, do they want to rely on the tech and support one of their biggest competitors?” says Roger Dunn, Global Retail Media Lead at Diageo. “Larger players are unlikely to go there, but for smaller players, this might just be the aggregation play that helps them unlock a meaningful ad business, without the need for a large investment in team and tech.”
“Established retailers won’t adopt this,” said the Head of Retail Media at a major category retailer on LinkedIn.
Threading the Needle: Amazon’s Balancing Act
Amazon is in a delicate position. The platform promises data separation through AWS Clean Rooms. But it’s their unmatched sophistication in retail media tech that is their strongest card. Drew Habeck, SVP of Media at Omnicom’s Flywheel agency, emphasizes the advantage: “The consistent measurement, reporting and purchase data across different retail platforms is incredibly insightful for campaign performance and optimization.”
This echoes Google’s strategy of democratizing programmatic advertising. Amazon could potentially grow the retail media market. For retailers considering this partnership, the calculation is complex. Benefits such as sophisticated ad tech, access to major advertisers, and proven measurement must be weighed against concerns about data control and long-term competitive positioning.
This move also creates challenges for retail media tech vendors. Amazon’s massive scale and established advertiser relationships could reshape the competitive landscape for ad tech providers. Whether Amazon can maintain clear boundaries and respect retailer independence will determine success. Perhaps Amazon’s bold bet will democratize retail media or cement its dominance.
