Amazon, a Case for Protecting Consumer Choice

April 18, 2018

By Ray Kingman


In a Twitter tantrum, Donald Trump accused Amazon of taking advantage of the United States Postal Service. While the president is motived by the fact that Amazon CEO Jeff Bezos also owns The Washington Post — a newspaper that's led the way in documenting the smorgasbord of Trump administration scandals — the attack on Amazon dovetails with a long-running narrative that casts the company as the villain. But, Amazon isn't evil, it's just increasingly pervasive.

Amazon is establishing an increasingly firm grip on consumer wallets, thanks to a rapid integration of services, goods, and content distribution. Unlike Google or Facebook, which largely stick to facilitating commerce, Amazon has vertically integrated and positioned itself at, or near, the point of transaction with both media and products.

Meanwhile, Google and Facebook are falling behind Amazon because they really only do one thing: broker consumers to brands as advertising-friendly audiences. For all their might, Facebook and Google have only a tenuous hold on consumers. Last quarter, one million North Americans proved how easy it is to simply quit Facebook. As Congress and the public deal with the aftermath of the Cambridge Analytica scandal, we'll see if one million lost accounts are just table stakes or a larger disruption.

But for the brands and retailers that have struggled with the prospective perils of the duopoly, a potential consumer backlash won't deliver salvation. The reason: Amazon's entry into the online advertising business — currently at an estimated run rate of $1.6 billion per year, according to eMarketer — is a much bigger threat than the duopoly.

Consider how advertising works. From a macro level, omnichannel is a virtuous circle of online and offline advertising that addresses the consumer when they're ready to transact. Omnichannel optimizes the logistical paths of both communication and distribution by matching the right messaging with the best-qualified audience. In effect, advertisers lay "pipes" to communicate with consumers, either directly or through channels like Facebook, Google, and the open internet. But, in terms of laying pipes and connections that stretch to the last mile of a transaction, who does it better than Amazon?

Amazon literally owns much of the plumbing of ad tech through Amazon Web Services, which, according to Gartner, controls almost half of the cloud. That's a lot of prime digital real estate for one company. Even more shocking, Google's cloud market share is less than 3 percent.

When you connect the cloud to the home, Amazon's advantages become even more pronounced, thanks to e-commerce beachfronts on mobile and desktop, just-in-time product delivery, and television original programming that even includes live NFL games. And while we're on the subject of TV, it's worth pointing out that Amazon is second only to Roku in terms of OTT devices. Meanwhile, Amazon devices like Echo have dominated Google's offering inside the home, even though there's good evidence that Google has the better product at the moment.

While President Trump dreams up fake news about Amazon taking advantage of the post office, it is the brands and retailers that must wake up. How will they respond when Amazon systemically links Amazon-controlled advertising channels with its ability to control message delivery through Amazon proprietary devices, product services, and media programming? Left unchecked, Amazon will be able to pick winners and losers.


Privacy and the Protection of Choice

Amazon has done an extraordinary job securing its strong foothold in our consumer culture. It has mastered long-tail theory and married it with the best parts of the big-box phenomena, making our lives richer and more efficient. It should be admired and respected for its business insight and execution.

That said, we must exercise caution. No company, including Amazon, should be so pervasive that they're able to limit our access to markets or become "arbiters of taste." We need safeguards against monopolistic business practices that limit consumer choice.

One of these safeguards is privacy. Given the Gordian Knot that privacy has become domestically and internationally, a constructive first step to addressing online privacy has to involve companies stepping up to their social responsibility for protecting their first party customer information.

A user of any service or product should recognize that the service or product has a right to market to you. That's a key part of the social contract we are entering into. However, that social contract should not grant that service provider the right to broker your identity to third parties for profit.

In the case of Amazon, it has earned the right to cross-sell its products and services to its customers. As a matter of privacy, however, our first party digital ID on Prime is a one-to-one relationship. Our identities are not commodities that Amazon should be able to license to third-party advertisers without our opt-in consent. What's at stake isn't some vague notion of "protecting data," it's consumer choice.


Ray Kingman is the CEO at Semcasting, where he directs the day-to-day operations of the company and leads the development and commercialization of its automated targeting and data offerings. He is an experienced innovator in the content management, analytics, and data visualization fields.


The views and opinions expressed in Marketing Maestros are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.

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