According to Wall Street Journal and Search Engine Land, Amazon will stop showing Product Ads on amazon.com by Oct 31st 2015. Industry experts assume that the CPC based ad format will be stopped in all other countries as well.
Amazon Product Ads allow merchants to visually advertise their inventory without being part of the Amazon Marketplace. A click on a product ad directly leads to the merchant’s website.
Contrary to the Marketplace, where 3rd party sellers are charged a commission, advertisers have to pay a CPC to Amazon for directing traffic to their site. According to eMarketer, Amazon’s advertising business is estimated to create $1.26 billion in 2015.
Cannibalisation Might Be the Reason
While Amazon did not provide an official explanation yet, cannibalisation might be a likely reason. Amazon monetises by both selling goods to consumers and clicks to advertisers. Both strategies can, of course, easily compete with each other. For every click on a product ad, the shoppers are directed to another website – where they are able to do a transaction that might as well have happened on Amazon.
The big question of whether Product Ads help Amazon to bake a bigger cake – by selling clicks to advertisers – or make the cake smaller is probably answered. Amazon should now be able to quantify opportunity costs caused by cannibalization effects precisely.
What reasons do you suspect for Amazon to stop their Product Ads service?