If you were to grade Amazon like a report card, I imagine it would read something like this for the first half of 2019: Rapid expansion into new markets – A. Growth within their original content division – A. Further diversification of revenue streams by acquiring Sizmek’s ad-tech – A+++. Amazon is what I like to call a classic overachiever. Granted not everything they do works out, but beyond all the impressive headlines and grandstanding, we’re looking at a business with one very specific goal in mind: Dominance. Pure and simple.

And really, Amazon should be trying harder to hide that fact given that The FTC and Congress are currently baying for its blood. Although to be fair, regulators also have Facebook, Apple and Google in their sites too, but the inclusion of Amazon in this very public line up is interesting, as up until now they have avoided much of the fire. Of course, if you think this would dampen their expansion plans in the wake of such intense and increased scrutiny, you’d be wrong.

Think about how they got from an online bookstore to the powerhouse it is today. Owning a virtual warehouse wasn’t enough, so they created their own retail line. Netflix was winning the streaming and then content creation war, so Amazon acquired LoveFilm and formed Prime Video. Groceries have always been a tough nut for them to crack, so it bought up Whole Foods. Clearly, they have a formula for success and now it has its sights set firmly on conquering the advertising world too.

Rumours surrounding Amazon’s interest in acquiring Sizmek’s ad-tech stack were widely circulated even before it confirmed its interest and subsequent winning bid. Few were surprised at the news and most caught onto what this could mean in broader terms; a real and credible threat to the current duopoly dominance of Google and Facebook.

The landscape today seems skewed very much in favor of these two, but in reality, it’s Google that has virtually free rein in the programmatic market, despite Facebook’s abundance of data sources within its own walled garden, and as Amazon gets serious about its offering, there is still everything to play for.

Not that Amazon has exactly been quiet about its ad ambitions, but by inserting Sizmek’s ad server into their stack, which already consists of their DSP and other proprietary search tools, this is as good as throwing its hat into the ring and challenging Facebook and Google to a full-on fist fight. In the short to medium term, this probably won’t worry Zuckerberg et al. because Amazon will likely be cautious in scaling up its advertising capabilities, consolidating things in-house and working out the most appealing approach to entice brands. That’s not to say that they shouldn’t be taken seriously however, as by 2023 Amazon could account for 14% of total US digital ad sales, according to Business Insider Intelligence estimates.

Latest figures put Amazon’s ad division revenue at approximately $2.5bn per quarter and growing YOY. Over time, the business will evolve further, diversifying its offerings beyond display ads and leveraging its unique position with access to consumer purchase data to target not only on its main e-commerce platform, but across its mobile app and Twitch, as well as devices, such as Echo and Fire TV.

Ramping up its ad-supported OTT streaming video offering in line with this is likely too, especially if they want to attract the bigger brands to premium content. By adding an ad server into the mix, Amazon can expand its ad market share into pure-play video and fend off increasing competition from newer entrants to the streaming market, like Hulu.

Buying Sizmek’s technology on the cheap is a doubly shrewd move for Amazon. Given the huge wealth of data they hold, purchasing rather than wasting time building their own tech in-house, puts them on an even playing field to compete with the other walled gardens much quicker. Plus, adding ad-serving capabilities could also enhance Amazon’s attribution and measurement solutions, providing them with an additional layer of insights to power better marketing decisions.

Despite a dramatic eleventh hour bid from Ycor, there wasn’t much doubt that Bezos and his very deep pockets would prevail in securing the tech; after all, what Amazon wants, it gets. Still, it’s clear that with this purchase they see long-term strategic value beyond just another revenue stream to master; they are reaffirming their commitment to creating a viable ad-serving arm of the business. What Amazon doesn’t know yet it will learn, supported by the Sizmek ad-tech team, helping them shape and build on their current offering, which will allow them to make further strides into profitable programmatic territory.

Ultimately, industry commentators are currently reserving judgement, split between optimism and skepticism on whether Amazon can deliver on the hyped potential. My take is that Amazon will need to invest and understand the landscape quickly if they are to make a dent in a sector as complex and competitive as ad-tech, but their capacity to do so is absolutely there.

We may not have a ‘triopoly’ on our hands just yet, but we have all the makings of a shifting landscape that could tear down the walled gardens for good, allocate spends more equally, or create a new monopoly. What’s clear however, is that we have only just entered the Amazon; now it’s time to navigate our way through the tech jungle that lies ahead.

Written by Ayman Haydar,
Chief Executive Officer