Is Amazon Entering the Display Ad Business?

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Amazon already offers display advertising opportunities on its own website. But the company may be preparing to be a much bigger force across the web as it looks to become a major player in the online display advertising market. That’s the conclusion of analyst Ben Schachter of Macquerie Research.

Schachter, in a research note, observes that Amazon is making investments to compete in the $30 billion online display advertising market, well beyond the existing business it runs by offering ads on its own site. Looking at recent job listings, Schachter concludes that Amazon is likely planning to use its consumer data and new ad targeting experience to raise eCPMs for online display ads both on its own site and on third-party sites. The retail giant is likely to create a sophisticated system delivering targeted performance-based display ads that incorporate affiliate advertising and real-time bidding, Schachter said. He thinks there’s no reason why Amazon can’t emerge as a competitor to existing players such as Google and Yahoo.

In recent job listings for the Amazon’s display advertising team, the company says:

“Amazon.com is continuing to build out its Worldwide Online Display Advertising business to tap into the growing online advertising market. Display Ads is one of Amazon’s fastest growing and most profitable businesses. We plan to build next generation advertising products by leveraging Amazon’s world-class personalization technologies, unparalleled customer data and engaging video content.”

Schacter also points out other illuminating quotes from Amazon including:

“Display Ads is one of the hottest tech sectors… Amazon is uniquely positioned to leverage our culture of customer obsession…and change the industry.”

“The New Ad Products group was recently formed to build advertising systems to address new market segments.”

Now it’s unclear if or how Amazon will change the online advertising industry, but it has some interesting tools in place. As Amazon itself notes, it has a good handle on how to target users with its personalization tools and it’s got a lot of data on what users are doing and what they want to purchase. This would also be another way in which Amazon is growing beyond its traditional roots as an online retailer. The company is in the hardware market with its Kindle and it recently launched an app store for the Android platform. We recently reported on speculation that Amazon could soon be launching a tablet competitor as well going up against Apple and Google. Online ads would also be another area in which Amazon competes with Google.

We still have to see what Amazon’s ultimate ambitions are in advertising. But with opportunities abounding for Amazon, it may not be too far-fetched to see it jump into this market.

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