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Looking at Amazon's quarterly financials, it would be easy to mistake the company's $31b ad division as a serious shift in the online advertising industry, but that would be a huge mistake. You see, Amazon's not really selling *ads*. 1/
If you'd like an unrolled version of this thread to read or share, here's a link to it on http://pluralistic.net , my surveillance-free, ad-free, tracker-free blog:
https://pluralistic.net/2022/02/27/not-an-ad/#shakedowns 2/
https://pluralistic.net/2022/02/27/not-an-ad/#shakedowns 2/
Nearly all of that $31b is for an "ad" *on Amazon itself*: that is it's Amazon collecting billions from the sellers who rely on the company as their main retail channel, who are locked in a bidding war to buy the top spots in search and product pages. 3/
This is a huge shift for Amazon in every way. In 2015, the company was booking $1b in annual ad revenue. The explosive growth of ad revenue was accompanied by an increasing presence of third-party Amazon Marketplace sellers: 3% in 2000, 60% today. 4/
But just as significant is the shift in how Amazon presents its merchandise. As @MarketplacePuls succinctly put it, "Everything on Amazon is an Ad."
https://www.marketplacepulse.com/articles/everything-on-amazon-is-an-ad 5/
https://www.marketplacepulse.com/articles/everything-on-amazon-is-an-ad 5/
In a search result, the first 3-7 thumbnails are "sponsored results." On a product page the top bar, the bottom third, and large swathes of the right bar and main body are for sale. 6/
To make this clear: Amazon retail business today is as an intermediary, a #ChokepointCapitalist marketplace with customers corralled on one side and merchants on the other, with a gate in between where it collects rent to let one side talk to other. 7/
Amazon calls itself "Earth's most customer-centric company," a slogan that pits the people who rely on Amazon for goods against the sellers who provide those goods, the warehouse workers who pack the goods, and the delivery drivers who drop off the goods. 8/
Sure, Amazon says, your conscience might twinge for the small business people squeezed by Amazon, or the workers being maimed in the warehouses or peeing in bottles in their vans. 9/
But we do it all for you: we have figured out how to match you with the things you need at the best price.
But Amazon's ad business - the third-largest ad business in the world - is the opposite of a "customer-centric" business. 10/
But Amazon's ad business - the third-largest ad business in the world - is the opposite of a "customer-centric" business. 10/
As @TrungTPhan reminds us, Amazon launched with a much-vaunted "collaborative filter" whose recommendations were driven by users, not sellers:
https://trungphan.substack.com/p/amazons-31b-ad-business-explained 11/
https://trungphan.substack.com/p/amazons-31b-ad-business-explained 11/
In its seminal paper on the system, Amazon promised a store that "radically changes based on customer interests":
https://www.cs.umd.edu/~samir/498/Amazon-Recommendations.pdf 12/
https://www.cs.umd.edu/~samir/498/Amazon-Recommendations.pdf 12/
Remember when Amazon's screen real estate was given over to "Customers who bought this also bought this" and "Customers who viewed also viewed"? Today those slots are filled with "Sponsored products related to" and "Brands related to this category." 13/
In other words, Amazon has converted its "customer-centric" personalization system, which emphasized the products it predicted you would like best, into an auction house, where the products that have paid the most come first. 14/
Amazon sellers - 60% of sales and rising - must choose between spending on better products or better placement on Amazon. If they choose better products, you'll never find them. Amazon made $32b last year contributing to the crapification of everything it sold. 15/
No wonder that Amazon Marketplace is being gobbled up by "gators" - Amazon aggregators who raised billions in the capital markets to buy out independent sellers, rolling them up into deep-pocketed conglomerates.
https://pluralistic.net/2022/02/10/monopoly-begets-monopoly/#gator-ade 16/
https://pluralistic.net/2022/02/10/monopoly-begets-monopoly/#gator-ade 16/
Gators are like miniature Amazons: markets where success is based on capital, not quality. They're investor cash multipliers. Their tactic isn't better products at better prices, it's outmaneuvering smaller rivals who can't afford to bribe Amazon to give them pride of place. 17/
As an employee at Thrasio, a $10b gator, told @KristaKBrown for @TheProspect: "I cannot imagine being an individual seller."
https://prospect.org/power/rollups-gators-defining-the-merchant-makeover/ 18/
https://prospect.org/power/rollups-gators-defining-the-merchant-makeover/ 18/
There is one major seller that is immune from this arms-race to buy your business from Amazon: Amazon itself. 19/
Amazon's own-brand business - which data-mines its business customers' sales data, manufacturing information, and other commercial intel, and then knocks them off - doesn't have to buy the top of the page. Amazon's own products get those slots for free. 20/
Which means that Amazon has tied a $32b anchor around its sellers' necks, then asked them to compete with its knockoffs of their products by outbidding them in search- and product-pages, on which Amazon can top any third-party bid by writing an unlimited check to itself. 21/
Amazon became Amazon because of extremely specific, explicit political choices that were made by a string of US administrations, starting with Ronald Reagan and ending with Donald Trump. 22/
Per @linakhanFTC's seminal "Amazon's Antitrust Paradox," the "consumer welfare" antitrust of Reagan required regulators to tolerate egregiously monopolistic conduct, so long as it resulted in "consumer benefits" (lower prices and/or better products):
https://www.yalelawjournal.org/note/amazons-antitrust-paradox 23/
https://www.yalelawjournal.org/note/amazons-antitrust-paradox 23/
Under this theory, Amazon was able to use predatory pricing, abusive labor practices, and anticompetitive acquisitions to corner markets, so long as it could claim to be "Earth's most customer-centric company." 24/
But the "consumer welfare" benefits of monopolies are inevitably fleeting. Amazon's "customer-centrism" was and is a tactic, not a goal. The goal is maximizing profits. 25/
If "customer-centrism" - in the form of abuse of workers and suppliers to secure lower prices - brings in our business, Amazon will do that. 26/
But once Amazon locks us in - say, by convincing us to buy a subscription to its products in the form of a Prime "membership" - that "customer-centrism" takes a back seat to revenue extraction. 27/
Prime isn't merely a tool for locking is customers - it's every bit as much a tool for locking in sellers. Being a Prime seller is a prerequisite for scoring high on search results. 28/
To be a Prime seller, you have to hand over 45% of your revenues to Amazon, and pledge not to sell more cheaply anywhere else.
https://pluralistic.net/2021/06/01/you-are-here/#prime-facie 29/
https://pluralistic.net/2021/06/01/you-are-here/#prime-facie 29/
That means that anyone serious about selling on Amazon is a Prime seller, and therefore has to charge extra in order to avoid losing money on every Amazon sale. That higher Amazon price becomes the universal price, thanks to Amazon's most-favored-nation status. 30/
In other words, Amazon has figured out how to raise prices not just for its own customers, but for all of its rivals' customers, too.
https://mattstoller.substack.com/p/amazon-primes-free-shipping-promise 31/
https://mattstoller.substack.com/p/amazon-primes-free-shipping-promise 31/
Every now and again, there will be a "fake Amazon review" scandal, in which we learn that billions are changing hands behind the scenes to "inauthentically" boost inferior products to the top of Amazon search results:
https://www.cnet.com/tech/services-and-software/features/amazons-never-ending-fake-reviews-problem-explained/ 32/
https://www.cnet.com/tech/services-and-software/features/amazons-never-ending-fake-reviews-problem-explained/ 32/
But "fake reviews" are just an end run around Amazon's own $32b payola racket. If Amazon cared about "Earth's most customer-centric company," recommendations would reflect predictions about the suitability of merchandise, not a vendor's ability to buy the top of the page. 33/
Which isn't to say that fake reviews aren't a problem. They really are, especially in light of Amazon's pivot to selling recommendations to the highest bidder. 34/
Customers who understand that Amazon's search results are a game of moneyball (not a merit-based sorting) use those reviews as means of sorting the wealthy from the useful, relying on 5-star counts to guess at the best products. 35/
But with Amazon selling search-results and sleazy fake-ad peddlers selling reviews, there's no reliable way to sort the good from the bad. 36/
"Earth's most customer-centric company" has captured the market, raised prices, lowered quality, and clobbered independents, all while pitting shoppers against workers. 37/
The ad-tech market is a hive of scum and villainy, but Amazon's version of ads - payola - is an entirely separate industry, with its own multitude of sins. 38/
Image:
Jean-Leon Gerome (modified)
US Treasury (modified)
Amazon (modified) 39/
Jean-Leon Gerome (modified)
US Treasury (modified)
Amazon (modified) 39/
