The decentralization of Amazon: How the eCommerce behemoth aims to infiltrate third-party shops and platforms

1. A trio of platform partnerships in seven months
2. Who’s paying whom for what?
3. Counter measure to Apple’s tracking opt-in pressure?
4. One expert sees the "Relevancy Score" as relevant
5. Tiktok Shop to surpass 200b GMV by 2028?
6. Gamechanger: "Buy with Prime"
7. "Co-branded social media ads" for "Buy with Prime" partners
8. "25 percent increase in conversion rate"
9. Amazon v Shopify
10. Can amazon siphon off some of Shopify’s GMV?

Buying on Amazon is routine: Navigate to the website or open the app, browse, click and voila! Moving forward, however, that may change as Amazon further expands away from said website and app. In the US, for example, Amazon customers can place orders with Amazon directly on Instagram, Facebook, Snap and Pinterest, as well as in various independent online stores, provided that they are Prime members. Today, OMR is breaking down just how Amazon is trying to evolve from an "Everything Store" to an "Everywhere Store," and taking a look at some of the possible motivation behind the strategy.

The news itself was a bit odd: two of the biggest tech companies on the planet team up to form a partnership. Odder still was how and who broke the deal: a LinkedIn post by the founder of a small performance marketing agency in Miami. Maurice Rahmey discovered an ad on Instagram for a side table sold by Amazon. What really caught his eye what that he was able to link his Instagram account to his Amazon customer account via the ad and then subsequently order the product shown directly in the ad.

A trio of platform partnerships in seven months

An Amazon spokeswoman confirmed to Techcrunch that this new feature is rooted in a partnership between Amazon and Meta: “For the first time, customers will be able to shop Amazon’s Facebook and Instagram ads and check out with Amazon without leaving the social media apps.” The new feature is currently limited to the US.

A sampling of Amazon "shoppable ads" on Facebook (GIF source: Meta/Techcrunch)

Meta is not the only platform Amazon has entered into such a partnership. A week after the Meta deal, US tech blog The Information (€) broke the news of a similar partnership between Amazon and Snap. And back in April, Pinterest announced a similar deal with Amazon. When users click on an Amazon ad on Pinterest, they’ll be taken directly to Amazon to make the purchase," Pinterest told Techcrunch at the time.

Who’s paying whom for what?

The press release on the partnership with Pinterest (which is currently no longer available; the archived version can be viewed here) already indicates that not only items sold by Amazon itself will be advertised on Pinterest in this way, but also those by other brands. A Techcrunch article on the Meta partnership also states that products from sellers who are active on Amazon's marketplace will also be promoted accordingly.

There is no public information available regarding the exact conditions of these partnerships. Does it’s Amazon absorb the costs for placing the ads or are the other brands, whose products will be promoted in the future, on the hook? Will Amazon simply take a predefined amount of advertising inventory from the platform partners and sell off some of it or will it pass on a percentage of the sales generated to the platforms? All of that can only be speculated upon.

Counter measure to Apple’s tracking opt-in pressure?

However, Amazon may also be less interested in generating additional ad revenue. Could the partnerships perhaps be more an attempt to mitigate the consequences of Apple's App Tracking Transparency (ATT) introduced in the spring of 2021? As a result of ATT, app operators now have to ask whether they are allowed to track users across apps. Many users refuse permission, which makes it much more difficult to measure the impact of advertising in the mobile environment.

However, if, in future, products are purchased within the same app in which the advertising was displayed, this could simplify tracking again. However, Amazon states that it does not share any data about purchases with its platform partners, only "an estimate of the value of the Amazon product ads."

One expert sees the "Relevancy Score" as relevant

Mobile expert Eric Seufert believes that Amazon has chosen this type of wording very carefully in order to keep a possible loophole open—for example by transmitting a "relevance score" to Meta, which indicates how much the respective ad was of interest to the user. Such an approach could help to generate additional demand and improve targeting, according to Seufert at X.

Seufert also suspects that the move could be a reaction to a potential threat from Tiktok Shop. The short video platform has been building its own marketplace under this name for some time, including in the USA, the UK and some Asian countries. The basic idea: products can be purchased directly from content without navigating away from the app.

Tiktok Shop to surpass 200b GMV by 2028?

Platforms from the West, such as Instagram and Pinterest, have so far struggled with social commerce and generating direct sales. However, none of the local platform companies have yet invested as much into the model as Tiktok (or its parent company Bytedance).

According to The Information, Tiktok is reportedly planning to sink around USD 500m to grow Tiktok Shop this year alone. Bloomberg also reported that the marketplace is poised to generate USD 20b in gross merchandise volume (GMV) in 2023—a figure that is projected to rise to USD 200b by 2028; a mid-range double-digit billion sum of which is expected to remain with Tiktok as internal sales.

Gamechanger: "Buy with Prime"

Even if Tiktok Shop were to hit that lofty target, Amazon figures to remain orders larger, as it just recorded a GMV of USD 693b in 2022. The truth, however, is that Amazon saw growth stagnate in 2022, making it all the more plausible that the company was searching for new ways to generate more impactful growth and identified sales outside its own marketplace as an opportunity.

The first step in Amazon's "decentralized expansion" took place in April 2022 with the launch of "Buy with Prime." As part of this program (previously only available in the USA), brands can offer Prime purchases and delivery in their online stores, even if they do not yet sell on Amazon's marketplace. "Buy with Prime" partner stores can use Amazon's logistics services (for a fee, of course) and thus offer fast and free delivery to members of Amazon's customer loyalty program.

The fees Amazon levies for participating in "Buy with Prime"

"Co-branded social media ads" for "Buy with Prime" partners

Partners also have access to various marketing tools: they can not only use the Prime logo for their advertising, but also integrate Amazon reviews into their online store to potentially generate more trust among first-time buyers.

How "Buy with Prime" store integration looks (here from "Epic Water Filters")

A few months after the launch, Amazon also announced that it would give "Buy with Prime" partners the opportunity to advertise their own products on Amazon's marketplace as well as co-branded social ads on Facebook and Instagram. It certainly possible that the "Shoppable Ads" Maurice Rahmey discovered were the first version of these ads, which Amazon is currently still testing, but hopes to open up to other brands at a later date.

"25 percent increase in conversion rate"

In January 2023, Amazon announced that the integration of "Buy with Prime" in online stores would increase their conversion rate by 25 percent on average. No public data can be found on how many stores are already using the offer. The tool statistics services Builtwith and Storeleads both estimate the number of stores at more than 3,000.

In the eCommerce industry, the introduction of "Buy with Prime" was generally seen as an attack on Shopify, although its target group primarily consists of direct sales brands that do not necessarily sell on Amazon. However, the Wall Street Journal reported back in December 2020 that Amazon was attempting to copy parts of Shopify's business model as part of "Project Santos," which was allegedly initiated by founder Jeff Bezos himself.

Amazon v Shopify

Shopify was initially reluctant to accept "Buy with Prime." "We should not do this," a member of Shopify's product team is said to have written in a Slack chat with regard to a possible integration of Amazon into Shopify Stores, according to The Information (€). "I understand this is about creating merchant value, today. But this makes Amazon stronger, locks merchants into Amazon more, and is bad for them long-term."

Shopify initially warned merchants who integrated "Buy with Prime" into their store about the service and informed them that it violated Shopify's terms and conditions. However, a few days later, Amazon announced an agreement with Shopify. According to Business insider, Amazon has made concessions to Shopify: instead of Amazon's payment service, Shopify stores will now also use Shopify's payment service for "Buy with Prime," which represents a relevant source of revenue for Shopify.

Can amazon siphon off some of Shopify’s GMV?

Partnership notwithstanding, Shopify, and its with a GMV of 197 billion US dollars in 2022, is likely to be Amazon's biggest competitor in the West. If Amazon can take just a slice of this market through "Buy with Prime" via commissions and fees, they‚ could generate a relevant increase in growth.