For decades, Jeff Bezos shunned ads.
But now, Amazonโs ad business is huge: itโs on a $30B+ annual run rate (more than 2x the combined sales of Twitter, Snap and Pinterest).
Hereโs how it happened ๐งต
1/ Amazon doesnโt break out its ad business separately in financial filings. However, most analyst believe ads make up the majority of its โOtherโ revenue segment.
This figure has exploded from $1B in 2015 to a current annual run rate of ~$32B.
2/ In 2009, Bezos said โads are the price you pay for a crappy productโ.
But the business is so lucrative that Amazonโs interface has been swamped with ads:
โป๏ธ First 3-7 search results (left in red)
โป๏ธ Most of the product page (right in blue)
3/ Prior to the rise of ads, Amazon set out to build the ultimate organic customer recommendations engine.
The approach was codified in a famed 2003 research paper: โAmazon Recommendations: Item-to-Item Collaborative Filtering.โ
4/ In recent years, Amazon organic recommendations:
โป๏ธ"Customers who bought this also bought this"
โป๏ธ"Customers who viewed also viewed"
Have been replaced w/ ads:
โป๏ธ "Sponsored products related to"
โป๏ธ "Brands related to this category"