Amazon's Advertising Secret Sauce: Tech, Video, And The 'Holy Grail' Of Data
Amazon built a world class digital ad business almost in secret, with the most valuable data an advertiser could want.
Here’s part two of our mini-series on how Amazon built the world’s fastest growing ad business. This week, journalist Mike Shields explores the technology behind the ramp up. - Alex Kantrowitz
By
As Amazon ramped up its ad business, its internal technology was a mess.
Part of the company’s culture was to start new businesses with smaller, “two pizza teams” — as in, you could feed the group with just two pizzas — so it ended up building a bunch of different, disconnected systems.
The company had one group selling to large brands, another selling to smaller, independent, brands. Each had their own user-interface for managing ad inventory, featuring different functionality, and different underlying technology. To serve ads on Amazon.com itself, the company needed to use Google’s technology.
“Trying to deploy features across these things was brutal,” said a former Amazon ad executive. But it was typical Amazon, where different fiefdoms are empowered to take on new projects, leaving the overlaps and integrations to be figured out later.
Eventually, the company developed Project Barnum, an initiative aimed at brand and product simplification. “We needed to simplify the back-end tech,” one ex-Amazon product manager recalled.
Meanwhile, Amazon started to realize it would eventually run out of room for ads on Amazon.com, so it experimented using its data on third-party ad platforms to sell ads across the rest of the web.
Amazon also rolled out APIs for search ads (initially called Amazon Marketing Services API), enabling advertisers to buy ads on its properties via outside technology.
And in 2012, the company introduced Amazon Ad Platform, its own tool advertisers could use to buy ads on Amazon.com.
Most executives see this series of decisions as pivotal for growth.
“We had gone to market as a publisher, selling sponsorship packages,” said one early Amazon Ads hire. “We were not a platform. This let us take a performance media approach. What nobody really understood at the time is that it would lead to a multi-billion dollar business.”
The team then got to work building the holy grail of digital advertising: Helping advertisers track whether their ad spending was leading to purchases.
For decades, brand and ad agencies have been able to gauge the effectiveness of their ad budgets through proxy metrics and educated assumptions. For example, looking at how weekly sales performed amid a heavy TV ad buy. There’s also been a long history of third-party research companies that promise to help brands connect ad activity with some measure of consumer impact (whether that’s awareness of a product, consumers’ opinion, or sales). This cottage industry of ad “attribution” businesses, while well established, was never able to perfectly determine the effectiveness of a given ad campaign.
Even Google or Facebook ads — as effective and trackable as they are — haven’t been able to precisely track when a customer makes a purchase because they generally send people to other commerce sites.
But on Amazon, ad views were happening in the same place as actual purchases. There was no ‘gap’ between exposure and action. A brand could run ads on Amazon and the company would immediately know which consumers clicked on them, and who bought something.
Yet initially, Amazon didn’t have a system in place to share such data. “That was deliberate,” said one former seller. “We were nervous about pushing this. We thought, ‘Why sell ourselves short?’”
Plus, Amazon was averse to helping users leave Amazon.com.
That started to change once Amazon gained accessing bigger advertising budgets, and got the attention of Chief Marketing Officers, who were under big pressure to prove the impact of their spending
“Once we got to CMOs, that was our ace in the hole,” recalls this seller. “Once we launched attribution, well, even Google didn’t have that.”
Story continues below…
The secret to successful enterprise AI adoption? Access to 100% of data, regardless of where it resides. That principle is at the heart of Cloudera’s vision—and its latest global survey of more than 1,500 IT leaders shows just how far enterprises have come, and how far they still have to go, in making it a reality.
Building on Cloudera’s 2024 study, The Evolution of AI: The State of Enterprise AI and Data Architecture report highlights how priorities, obstacles, and goals have shifted in just one year, offering a snapshot of the rapidly changing enterprise AI landscape. It’s clear that AI has gone from experimentation to full integration: 96% of IT leaders reported AI is at least somewhat integrated into their core business processes – up from 88% in 2024.
Despite progress, enterprises still face challenges around security, compliance, and data utilization. In fact, only 9% of organizations said all of their data is available and usable for AI initiatives. Solving that problem, respondents cite the importance of a hybrid approach to data architecture with the flexibility to manage AI across cloud and on-prem environments.
Read the findings to see how enterprises can accelerate their AI adoption in this new era of convergence.
The Video Quest
Amazon’s advertising magic was in its ability to drive and measure purchases, but to crack the biggest marketing budgets, it had to push into video, particularly given that most people don’t actually spend much time with Amazon.
But Amazon’s big foray into video, Prime Video (launched as Amazon Instant Video in 2011) was designed to be ad-free, a streaming service aimed at attracting more Prime members, not advertisers.
Amazon did take a swing at a reality series, Fashion Fund, which featured Vogue editor Anna Wintour, and several brand integrations.
“It was not well received,” said one former staffer.
It would be two years before Amazon tried another video ad push, with the introduction of IMDB TV (which eventually became “Freevee”). Yet the company did make two alternative moves which allowed it to build credibility in this sector.
In 2014, Amazon won a bidding war against Google to acquire Twitch, thrusting it into the live streaming/influencer sector.
It also made a “stealth move” by launching Fire TV that year.
“Roku was running away with that market,” said one ex Amazon employee. “This was a big move, and it laid the groundwork for [a bigger TV play].”
Amazon started getting ad money from the HBO Gos of the world, as Fire was able to help drive distribution while using closed loop attribution data.
“We were bigger than Roku and no one knew it,” said one exec. “And we were now acting like a media platform.”
By 2021, it was time to take things up a notch, the biggest notch in media. Amazon landed the exclusive streaming rights to the NFL’s Thursday Night Football.
Given that NFL games are the last bastion of live TV viewing by large audiences, the move put the company into another advertising stratosphere. Yet the Amazon team had to learn a new sport, so to speak.
“You had all the Prime video guys, product leaders, who suddenly had the job of folding this live sports thing in, and they didn't know anything. They have all these expectations about how this should go down, but they were detached from the industry.”
Instead of using tech and data to sell to thousands of small brands, suddenly Amazon needed to dive into wining and dining huge sports sponsors. That caused some internal strife.
“We were learning the hard way,” said the former seller.
Amazon proved to be a quick study. By 2024 the ecommerce giant was one of several media companies to ink a deal to stream NBA games, starting next season.
Amazon Ads today
It’s funny to recall now that until 2022, Amazon didn’t even break out advertising in its earnings reports, showing that revenue in its ‘other’ category. In the years leading up to that moment, Amazon maintained a muted presence at major Madison Avenue events. In June of that year, Amazon debuted its own ‘port’ at the Cannes Lions Advertising Festival in France.
Today, if you’re sell something online, you must advertise on Amazon, otherwise you’re essentially invisible.
In fact, over the past few years, Amazon’s ad growth has led to the explosion of an entirely new ad category — retail media — which includes the likes of Target, Walmart, and Instacart chasing an estimated $177.1 billion global market, per the media buying firm GroupM.
Ironically, "I think the biggest catalyst for the ad business was the pandemic,” said Sammy Rubin, head of Growth Strategy & Integrated Marketing at the agency Wpromote. “Marketers needed growth. They had this catch 22 as to whether to invest in brand or drive sales. And we saw consumer packaged goods brands-double down on retail media. They found success, and other verticals followed. Plus, Prime streaming service also popped up [during lockdowns]."
Today, Amazon Ads leaders don’t talk about search ads, or commerce promotions, but rather delivering “the full funnel” to marketers, meaning they claim they can reach a person during every step of their ‘relationship’ with a brand - from when they first learn about a product, to when they begin to consider making a purchase, to ultimately pulling the trigger.
The cluttering of Amazon’s services with ads does call into question the team’s original rationale for building the business. Its customers are now beset by ads wherever they turn on Amazon properties, not exactly a value add. But for a company obsessed with customers, the definition of who its customers are is expanding, and it seems okay with degrading the experience for its original customers to serve its new ones.
If it wasn’t clear that Amazon was all-in on advertising, any doubt was likely dispelled when last year, they company flipped the switch on Prime Video, making an ad-supported experience the default for all subscribers (you can pay more for an ad-free version). Analysts predicted that move would generate an extra $7 billion in revenue overnight, and early indications are that Amazon has already shaken up pricing in the TV market. In fact, Amazon recently quietly moved to double the ad load on Prime, reported Adweek.
"If you look at things overall, you start to see they’ve been following consumer behavior, and now they have this 360 media offering around first party data,” added Rubin. ”It took them a long time to integrate this stuff, but by 2024, they're saying, “We're not a distribution platform. We’re a media company."
It’s a story many didn’t see coming. Most Amazon ad executives agree there was never a master plan that was telegraphed to the world, which in a weird way, helped the business grow under the radar. Today, while Amazon’s cloud division appears to be its highest margin business, CFO Brian Olsavsky called out advertising as "an important contributor to profitability."
“We got to build it without breaking it out of Amazon,” said a former Amazon ad leader. “That way, Google didn’t see it.”
This Week On Big Technology Podcast:Is Generative AI a Cybersecurity Disaster Waiting to Happen? — With Yinon Costica
Yinon Costica is the co-founder and VP of product at Wiz, which sold to Google for $32 billion in cash. Costica joins Big Technology Podcast to discuss the extent of the cybersecurity threats that generative AI is creating, from vulnerabilities in AI software to the risks involved in “vibe coding.” Tune in to hear how attackers are using AI, why defenders face new asymmetries, and what guardrails organizations need now. We also cover Google’s $32 billion acquisition of Wiz, the DeepSeek controversy, post-quantum cryptography, and the future risks of autonomous vehicles and humanoid robots. Hit play for a sharp, accessible look at the cutting edge of AI and cybersecurity.
You can listen on Apple Podcasts, Spotify, or your podcast app of choice
Thanks again for reading. Please share Big Technology if you like it!
My book Always Day One digs into the tech giants’ inner workings, focusing on automation and culture. I’d be thrilled if you’d give it a read. You can find it here.
Questions? News tips? Email me by responding to this email, or by writing alex@bigtechnology.com Or find me on Signal at 516-695-8680
 | A guest post by
|