A Look at Amazon’s Growing Advertising Sales in India, China, and Across Asia

Amazon’s growing advertising business has raised a lot of eyebrows this year. The company said* it did about $2 billion in advertising revenue in the second quarter of 2018, and that number is generally expected to grow healthily as we approach the holiday season. Ad loads on Amazon search results pages appear very healthy, and Amazon has been attempting to make it easier for advertisers and agencies big and small to spend money on Amazon’s variety of advertising products by simplifying its advertising product branding.

We haven’t heard as much about Amazon’s advertising sales efforts in Asia, but we’re starting to. According to a report by India’s Factor Daily, Amazon ad sales in India are approaching $100 million (we assume this means annual run rate).

Online retailer Amazon has quietly built itself a high margin digital advertising business in India which is closing in on revenues of nearly $100 million, about 5% of money spent online by brands in India… “Amazon doesn’t have its own ad network and agencies don’t yet understand how to use advertising on an e-commerce platform,” said an Amazon executive who did not wish to be named as he is not authorised to speak to the press… Nearly 90% of Amazon’s advertising business in India currently comes from the programmatic and direct sales route.

Amazon is one of the most widely visited web services in India. According to Alexa.com (Amazon’s original and now lesser-known “Alexa” service, which tracks web traffic stats), Amazon.in is the fourth-biggest site in the country.

Ad loads on Amazon.in for popular queries are on par with those in the US. As one example, here are search results pages for “polo shirt” in India and the US, respectively (side note, Amazon private label brands are prominent in both search results as well):

Sponsored results for “polo shirt” on Amazon.in:

Sponsored results for “polo shirt” on Amazon.com:

Amazon continues to hire advertising support staff in Bangalore and Chennai, including those supporting advertisers in other parts of the world, such as Italy and China.

We’ve heard even less about Amazon’s advertising sales efforts in China, Japan, Singapore, and the rest of Asia. Anecdotally, ad loads for “polo 衫” on Amazon.cn show decent ad loads. But perhaps more telling of where Amazon hopes to go with its Chinese advertising efforts is Amazon’s current plans to ramp up its advertising sales staff in the country targeting Chinese advertisers.

Per Amazon.jobs, Amazon is hiring 18 advertising account executives and onboarding specialists out of its Shanghai and Shenzhen offices. These positions reflect the growing number of Chinese brands that Amazon is targeting to bring onto its platform – to reach customers both in China and around the world. Amazon is looking for people with, “Experience working with China-based brands.” As the listings state:

The Amazon Advertising team helps CN-based advertisers to reach Amazon customers globally: on Amazon, across our other owned and operated properties, on other high-quality destinations across the internet, and on millions of Kindles, tablets, and mobile devices.

In addition, Amazon’s onboarding specialsts are focused on helping Amazon’s self-serve/CPC advertising customers ramp up their efforts:

Sponsored Products and Sponsored Brands are cost-per-click (CPC) self-serve ad programs in the Amazon Advertising world. In support to the Amazon Advertising’s business, we at Ad Success Team (AST) are building a group of energetic and highly motivated Associate Onboarding Specialists. As an Associate Onboarding Specialist, you will be responsible to help equip them to identify the Advertising business opportunity, review their product listings, create advertising campaigns and help them adopt high value actions on their account to influence their success in advertising.

In Meguro, Amazon Japan is staffing up its ad sales efforts as well, including Head of Vertical Sales for Amazon Media Group, Manager of Campaign & Creative Management, and several Account Executives. Amazon is staffing Japanese advertising onboarding specialists out of Shanghai as well.

Meanwhile, Amazon is continuing to hire ad sales staff in the US (primarily in New York) and Europe (primarily in London, Paris, and Munich), managing accounts, self-serve advertisers, and continuing to build Amazon’s DSP operation.

* Notes on chart above and Amazon’s filings:

  • In 2017 filings, Amazon’s footnote on “Other” revenue said: “Includes sales not otherwise included above, such as certain advertising services and our co-branded credit card agreements.”
  • In 2018 filings, Amazon’s footnote on “Other” revenue said: “Primarily includes sales of advertising services, as well as sales related to our other service offerings.”
  • Starting in 2018, Amazon said it made an accounting methodology change that resulted in an increase in “Other” revenue of $560M in Q1 2018: “Service sales also increased by approximately $560 million due to the reclassification of certain advertising services that were previously classified as a reduction of cost of sales.”

Follow TJI as Amazon continues to evolve its advertising products and the way it works with advertisers and agencies around the world.

Amazon Issued Patent for Alexa Technology to Determine Demographics, Emotional Status, and Health Conditions from a User’s Voice (and Offer Targeted Ads)

Amazon has been issued a patent on an Alexa technology that has the ability to determine certain physical and emotional characteristics of users based on their voice input, and offer help – sometimes in the form of offers for items for sale. While the patent doesn’t mean Amazon plans to launch products with this technology, it does reflect Amazon’s thinking on Alexa’s potential.

The patent, titled “Voice-based determination of physical and emotional characteristics of users,” is number 10,096,319. The patent covers Alexa’s ability to infer certain traits about Alexa users from their voice when determining how to respond:

Traits may include physical characteristics of a user (e.g., gender, age, ethnic origin, etc.), a physical condition or state of a user (e.g., sore throat, sickness, etc.), an emotional condition or state of a user (e.g., happy, sad, tired, sleepy, excited, etc.), and other traits.

Amazon provides an illustration in the application showing what it intends to cover. In the illustration, a woman is shown to be coughing and sniffling and tells Alexa she’s hungry. The Alexa system is able to determine her “abnormal physical or emotional condition,” and asks if she would like a chicken soup recipe, which she declines. At that point, Alexa takes the initiative to offer her another remedy and says, “By the way, would you like to order cough drops with 1 hour delivery?” When the woman accepts Alexa’s offer, Alexa confirms and concludes by saying, “Feel better!”

Digging deeper into the patent reveals some interesting details. Here are some highlights based on our reading of the patent:

1. Amazon has patented the technology to determine demographic characteristics of users from their voice — including gender, age, and ethnic origin:

For example, voice features may include a gender of the user, an age or age range of the user, an ethnic origin or language accent of the user, an emotion of the user, a background noise of the environment in which the user is located, and other voice features. As a result, content presented at a device may be specific to the user that is using the device (e.g., providing a voice input, etc.), as opposed to a user associated with the device, such as an owner of the device.

2. Amazon has patented the technology to determine physical characteristics of users from their voice — including certain health conditions:

In another example, a second voice processing or signal processing algorithm may be used to process or analyze the voice data to determine a health condition or status of the user. Detectable or determinable health conditions may include, among others, default or normal, sore throat, cold, thyroid issues, sleepiness, and other health conditions. Example algorithms may analyze breath sounds of the user based at least in part on the voice data and may use a cepstral feature set using SVMs and/or neural networks.

3. Amazon has patented the technology to determine emotional status of users from their voice — including joy, fear, and stress:

The first voice processing algorithm may be used to determine an emotional state of the user. Detectable or determinable emotions may include, among others, default or normal, happiness, joy, anger, sorrow, sadness, fear, disgust, boredom, stress, and other emotional states. Emotional states or conditions may be determined based at least in part on an analysis of pitch, pulse, voicing, jittering, and/or harmonicity of a user’s voice, as determined from processing of the voice data…

If it is determined that the user has an abnormal emotional state, the device or a connected computer may select a real-time emotional state of the user. The real-time emotional state of the user may be, for example, at least one of the happiness, joy, anger, sorrow, sadness, fear, disgust, boredom, stress, or other emotional states.

4. Amazon has patented the technology to target ads to users based on what it determines is their current physical and/or emotional condition:

A current physical and/or emotional condition of the user may facilitate the ability to provide highly targeted audio content, such as audio advertisements or promotions, to the user… For example, certain content, such as content related to cough drops or flu medicine, may be targeted towards users who have sore throats… In the example of FIG. 1, the cough drops manufacturer may have targeted users with sore throats for the promotional offer that was presented to the user 130. The targeting criteria for the promotional offer, or the offer generally, may include users with sore throats or users likely to have sore throats…

Audio content targeted to sleepy and bored users may be determined based at least in part on a data tag that identifies the voice data as a sleepy and bored user. For example, a musician may want to target an audio ad for his new album to users with “boredom” and “sleepy” conditions. Audio content for presentation may be selected from the candidate content and presented to the user. For example, the voice interaction device may audibly present “here’s a joke [ . . . ] By the way, this singer just released his new album for just $1.99. Do you want to preview it?” The user may respond affirmatively or negatively as desired.

Again, technology companies file patents often and do not end up launching products with the patented technology. However, the fact that Amazon filed this patent reflects the potential use cases Amazon sees in Alexa’s future.

In our view, these patented technologies raise some important ethical and philosophical questions that Amazon will likely need to take a clear stance on if it intends to launch products including these features. For example, what bounds should be placed on advertising based on these factors? In which scenarios is taking these factors into account at all when determining a response unethical? Would Amazon ever make such data available to Skill developers through Alexa APIs? What are the privacy implications of these systems knowing what a user’s home life is like?

At the same time, these technologies reflect the potential for “smart assistants” like Alexa to become much more emotionally intelligent and empathetic, creating better user experiences. For example, if Alexa could determine a user was in a happy mood when asking Alexa to “play music,” Alexa could automatically infer the user’s emotional state when choosing which songs to play.

Voice interfaces create opportunities for ambient computing to become deeply integrated in our physical spaces, and this patent addresses some important aspects of what that could mean for the future of human-computer interaction and commerce.

Follow TJI as we continue to track the development of the Alexa ecosystem and what it means for hardware developers, software developers, and customers.

Estimate: Amazon to Become 3rd Largest US Internet Advertising Platform in 2018

New estimates published yesterday peg Amazon at claiming 4.1% of the overall US internet advertising market, passing Oath and Microsoft. eMarketer estimates Amazon’s total ad revenue for the year at USD $4.61 billion. It estimates Google at 37.1% and Facebook at 20.6%.

Our take:

  • Facebook sits higher in the advertising funnel than Google, and Google sits higher in the advertising funnel than Amazon. As Amazon increases the sophistication of its ad offerings, which it has done significantly in the last couple of years, Amazon should be able to grow its ad revenue by double digit percentages annually just by fleshing out queries related to purchase intent.
  • Amazon poses a more direct threat to Google than Facebook in the near term for two reasons. One, consumer behavior could increasingly shift to use Amazon as the default search engine for queries related to e-commerce purchase intent, rather than Google. And two, Amazon is investing in building its ad network off of Amazon as well, which could begin to encroach on AdSense.