The Amazon pages feature text and banner advertising. Why would the world biggest online retailer include links in its pages that divert customers from transaction? Amazon has invested so much in its recommendation engine that the company has no rival when it comes to slicing and recombining product and consumer behavior information to drive transactions. So why would Amazon include low relevancy contextual and completely non-relevant banner ads on its pages? This was a mystery to me, so I wrote this post as an attempt to make sense of it.

Lets take a look at what exactly Amazon is featuring on its pages. I looked at the Sony Cyber-shot DSC-T7 camera:

There were two sections with advertisements, one with contextual text ads and the other one with banner advertising. Here is the text advertising that I saw:

The first advertising is a call to win a Xerox printer, which is not really all that relevant. The second one appears to be from a competitor who is also selling digital cameras online. The ad tells me not to pay too much and that I could save up to 75% on a digital camera.

The display ads shown on this page changed on each reload. Below are a couple of them. The first one is an ad for the Westin Spa and the second is for the upcoming Microsoft Sync product.

This is for Real

The contextual advertising on Amazon is provided by ClickRiver. There are two links next to the ads, one is a call to advertise on Amazon and the second one explains what the advertising is.

"Sponsored links are advertisements that Amazon.com provides for you. When you click on a sponsored link, we get revenue. All sponsored links are matched to your recent search queries or the content of the page. For example, if you search for "Bruce Springsteen" or view pages about Bruce Springsteen, the sponsored links may point to sites that sell tickets to his concerts or provide information about him. Sponsored links are always clearly labeled. Generating additional revenue from sponsored links allows us to offer lower prices to you -- something we are dedicated to doing in every way we can."

Ads Just Don't Make Sense

I am definitely not a guru when it comes to online advertising, but these ads seem to defy common sense. First the text ads lead directly to competitor pages. They are advertised as pay-per-click so Amazon gets paid only if the user clicks. Even though clicked-on ads open in a new tab, the user still leaves the Amazon product page. How likely are users to come back? The user maybe enticed by another offer, or become distracted and just forget about the open Amazon window. How much does Amazon need to generate per-click to make up the margin on potentially lost camera sale? It seems improbable that these ads are worth as much as the sale.

The banner ads are different, because they are random. Why would I click on the Westin Spa ad on this page? It is likely that these ads are not per-click, but rather per impression. If thats the case, then this makes more sense, because Amazon just gets paid on each page load. However, it begs a question - is it worth it to show these and damage Amazon's reputation? As a faithful consumer, I come to Amazon because of its brand, reliability and user experience. Seeing irrelevant, and even annoying advertising does not strengthen the relationship, instead it damages loyalty.

Perhaps the most mind boggling thing about the ads is that they are integrated along with the rest of the content. Of course text ads make sense in search engines, but Amazon's product pages are different. These pages used to contain 100% native content about the product, related products (sold by Amazon) and customers. The text and banner ads on Amazon's pages do not look native - they are just out of place.

Amazon Traffic is Down and Stock is Up

Perhaps the ads are just an experiment - I hope they are not permanent. But overall, why did Amazon tweak the pages again? Looking at the latest iteration, it is not really better than the one we covered in the beginning of this year. The product pages seem to loose order. The mix of product information, related products, forums, tags and on top of it ads, is just way too much. Amazon is already an awesome brand, it does not need to try so hard to sell the product. A shorter, cleaner page would probably be more effective than this complicated mix.

Yet, something is definitely up. Looking at the traffic graph over the past year, we see decline in page views:

Yet, Wall Street is happy. As we discussed here earlier, likely because investors finally grasped the clever Amazon Web Services play:

Conclusion

According to an article in Always On Magazine, in 2006 the online advertising market grew to $30 billion and will double by 2010. That is a mind boggling number, to say the least. Everyone wants a piece of this market. For startups, the answer to how are you going to make money, has for the most part been advertising and people have generally believed it. The opportunity is big, but advertising like everything else, cannot defy common sense.

First, advertisers will not spend a lot of money unless there is ROI. The ads need to make sense. They need to be tailored by context, time, and individual. The text and banner ads on Amazon defy common sense. I hope that we can get out of the senseless ad-craze and recognize that just like our advertising technology evolves, so do the consumers. People are not going click unless it makes sense.

What is your take on these Amazon ads? How are they rationalized and justifiable? It would be great to hear from readers who really know their way around online advertising world.