Amazon, a dominant player in the digital advertising space, recently announced a significant strategic shift. By the end of 2024, the company plans to discontinue its Amazon Ad Server, a decision that marks a move away from certain advertising technologies in favor of more promising avenues. This article delves into the implications and underlying strategies of this move.

Amazon’s strategic pivot in advertising

Amazon’s decision to close its ad-serving business is a clear indication of the company’s evolving focus within the digital advertising sector. The Amazon Ad Server, acquired from Sizmek in 2019, has been a key tool for advertisers to create and distribute ads across multiple platforms, including Amazon’s own sites. However, the company is now setting its sights on more lucrative and innovative advertising technologies.

Growth in other advertising services

Despite the closure of the ad-serving business, Amazon is not stepping back from the advertising arena. Instead, it’s bolstering other services like Amazon DSP (Demand-Side Platform) and Amazon Marketing Cloud. These platforms have contributed to Amazon’s significant growth in advertising revenues, which saw a 26% increase from the previous year, reaching over $12 billion in the third quarter alone. Amazon now holds a 7.5% share of the global digital ad market, a testament to its strategic adaptability, especially following the impact of Apple’s 2021 iOS privacy update.

Leveraging artificial intelligence and machine learning

The discontinuation of Amazon Ad Server may also signal a deeper investment in artificial intelligence and machine learning technologies. Amazon is on the brink of launching a new generative AI model, Olympus, aimed at enhancing its e-commerce storefront and Alexa voice assistant. Furthermore, Amazon Web Services (AWS) has introduced Amazon Q, a generative AI chatbot, showcasing the company’s commitment to AI innovation.

Amazon’s AI-enhanced search and ad technology

Amazon is not just focusing on AI in a vacuum; it’s integrating these technologies into its core services. The company is testing an AI-enhanced search functionality, which promises personalized product recommendations and comparisons, akin to the service provided by experienced store associates. This feature is expected to debut in the US soon.

Additionally, Amazon is expanding its footprint in ad technology with the launch of Amazon Publisher Cloud. This new platform is designed to compete directly with giants like Google and The Trade Desk, offering features like a data clean room for publishers to integrate their audience data with Amazon’s for targeted ad delivery.

Final thoughts

Amazon’s closure of its ad-serving business and the simultaneous expansion in other advertising areas reflect a strategic realignment. The company is focusing on segments of the digital ad market that promise higher profitability and innovation potential. This move, coupled with Amazon’s significant growth in ad revenues, underscores its strong and dynamic presence in the digital advertising space.

Tim Boesen

December 22, 2023

2 Min read