Amazon’s ad business is booming, but the e-commerce behemoth is reportedly cracking down on the promotion of certain products — not due to defects or counterfeit issues but because they’re not profitable for the company to sell.
According to a new report from CNBC, Amazon has tightened its restrictions on what items vendors can pay to push to the top of a page of search results. If something doesn’t meet the criteria, advertisers receive the following notice: “One or more of your products no longer qualifies for advertising because the sale of this product on Amazon.com currently results in a loss to Amazon.”
Inside Amazon, employees refer to these products as CRaP, meaning “Can’t Realize a Profit,” because the costs to store and ship the items generally outweigh any earnings from the sale. Bulky, inexpensive items are a particular target for the retailer, which in recent months has doubled down on efforts to improve its margins and profitability. Third-party merchants selling on the Amazon marketplace are still free to advertise money-losing products — after all, the sellers bear the costs themselves and shell out a 15 percent cut plus warehousing fees on top of any ad spend — but companies that sell their products on a wholesale basis could find themselves shut out. (Amazon, though, says its practices haven’t undergone any recent changes.)
While Google and Facebook still dominate the digital advertising landscape, Amazon’s share of the pie is growing: Last year, its ad revenue reached $4.61 billion, according to digital research firm eMarketer, a figure that’s expected to more than double in 2019. But unlike the current duopoly, Amazon doesn’t just act as an ad network — it also buys and sells product and competes with vendors through its private-label business, raising questions about the degree of control it wields, particularly as it continues to account for an ever-bigger share of consumer dollars.
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UPDATE: An Amazon spokesperson provided the following statement to FN: “Like all retailers, Amazon decides which products to market and promote in our stores based on a variety of factors, such as relevancy, availability, profitability and other factors. Amazon chooses not to advertise products available in its store that it can’t sell profitably, the same way retailers have marketed and promoted products in their stores for decades.