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Amazon’s cutthroat advertising tactics could cause merchant margins to crash

This exposé video is making waves among Amazon pros

When it comes to maintaining visibility for brands and merchants active on Amazon, purchasing ads is a must. But not only has the price of those ads steadily gone up, but now there is a brand new nightmare for brands: the eCommerce behemoth recently ran tests, in which users click an ad (which has been paid for by brands and merchants) and are shown a similar, but more inexpensive product–oftentimes from Amazon’s own brands. It’s the latest in a host of hostile actions by Amazon towards resident merchants.

Nearly 75,000 impressions, 642 likes and 333 comments in just over two days: posted by US-Amazon expert Izzy Benoliel on Linkedin, the video shows a user of the US version of the app searching for dietary supplement brand “Nested Naturals.” They then click on an add for a Nested Naturals product on the search results page. The user is then redirected to the Nested Natural product page, but then a layer immediately pops up plugging a product by “Amazon Elements,” Amazon’s own generic brand. The headline: “similar articles, lower price.” The Amazon product is almost 50% cheaper than the “Nested Naturals” original. There’s a yellow button promising to show further details and presumably leads to the Amazon Elements page, even though we do not see the redirect in action.

A five-dollar click for naught?

“Let’s review what’s happening here. This brand just paid Amazon (anywhere from $0.5 to $5) to get my click, only for them to redirect me to the Amazon version of this product instead. Unbelievable,” writes Benoliel about the video. Nested Naturals figures to have been on the hook for the ad spend once that click occurred, since the “sponsored product entries on the search page must be purchased by merchants from Amazon; costs are calculated by clicks.

It would appear that the video is documenting an isolated test being run by Amazon in the US. While another LinkedIn users did comment that they were able to recreate the test themselves in the US on their mobile device, we were unable to do so in our home market of Germany.

A breach of anti-trust statutes or unethical, but legit?

The fact that Amazon would appear to be exploring the viability of implementing such a function is reason enough for scores of users to take umbrage in the comments under Benoliel’s post. “Insane,” “dirty,” “frustrating” and “It would be really interesting to see what would happen if Amazon were to be sued as a result,” are just a sample of the outrage felt by some of the Linkedin users. Others view the practice pragmatically and with a sense of helpless resignation: “It’s their platform so they can do what they like.” The founder of Nested Naturals commented that “Amazon being Amazon 🙂 We play in their world and just have to accept the changing landscape.”

Others still see the practice as a legitimate, if cutthroat way for Amazon to push its own brand. “It’s no different than paying for shelf space in a chain drug store or big box (e.g. Target), only to discover the house brand right next to the advertiser’s product at a lower price (or worse, occupying prime endcap real estate),” says Stephanie Fiermann, marketing head at Mediacom in New York.

Amazon co-opts name-brand listing with its own ads

A significant segment of the online marketing industry, however, sees Amazon as being at war with name-brand articles. Every single merchant offering mass-produced goods or used articles, whose product are USP-less commodities, must fear that Amazon cuts deeper and deeper into their bottom line—something NYU professor Scott Galloway has been warning of for years now. Recently, it was Amazon’s forays into the battery sector that made waves. A video released depicts a user searching for Energizer batteries on the platform, clicking on an Energizer listing and then being redirected to a product page with a layer for generic Amazon batteries (“Save money with Amazon Basics”) plastered over top of the product page that it takes up the entire screen.

Energizer is also having to contend with Amazon plugging its Amazon Basics brand on mobile devices with a “similar item, lower price” layer as this tweet shows:

Last August, Amazon began placing ads on search and category pages for name brand articles plugging Amazon brands. What’s new is that the current practice impacts traffic that is generated via ads. Paid postings figure to account for the lion’s share of Amazon’s traffic. The only entries visible for many product searches are in fact paid posts.

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