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 Emphatically Denies Reports of Alleged Chinese Hardware Hacking

In a bombshell report published this morning by Bloomberg, reporters Jordan Robertson and Michael Riley tell the story of hacked motherboards making their way into servers used by Amazon, Apple, and hundreds of other customers of motherboard supplier Supermicro.

Essentially, the report claims that agents of the Chinese government bribed and threatened managers of factories of Supermicro subcontractors in China into allowing the agents to insert malicious chips onto the motherboards that would then provide a beachhead for the infiltration of networks of Supermicro customers.

From Bloomberg:

In 2015, Amazon.com Inc. began quietly evaluating a startup called Elemental Technologies, a potential acquisition to help with a major expansion of its streaming video service, known today as Amazon Prime Video… In late spring of 2015, Elemental’s staff boxed up several servers and sent them to Ontario, Canada, for the third-party security company to test, the person says.

Nested on the servers’ motherboards, the testers found a tiny microchip, not much bigger than a grain of rice, that wasn’t part of the boards’ original design. Amazon reported the discovery to U.S. authorities, sending a shudder through the intelligence community. Elemental’s servers could be found in Department of Defense data centers, the CIA’s drone operations, and the onboard networks of Navy warships. And Elemental was just one of hundreds of Supermicro customers.

During the ensuing top-secret probe, which remains open more than three years later, investigators determined that the chips allowed the attackers to create a stealth doorway into any network that included the altered machines. Multiple people familiar with the matter say investigators found that the chips had been inserted at factories run by manufacturing subcontractors in China…which by some estimates makes 75 percent of the world’s mobile phones and 90 percent of its PCs.

Still, to actually accomplish a seeding attack would mean developing a deep understanding of a product’s design, manipulating components at the factory, and ensuring that the doctored devices made it through the global logistics chain to the desired location—a feat akin to throwing a stick in the Yangtze River upstream from Shanghai and ensuring that it washes ashore in Seattle. “Having a well-done, nation-state-level hardware implant surface would be like witnessing a unicorn jumping over a rainbow,” says Joe Grand, a hardware hacker and the founder of Grand Idea Studio Inc. “Hardware is just so far off the radar, it’s almost treated like black magic.”

But that’s just what U.S. investigators found: The chips had been inserted during the manufacturing process, two officials say, by operatives from a unit of the People’s Liberation Army. In Supermicro, China’s spies appear to have found a perfect conduit for what U.S. officials now describe as the most significant supply chain attack known to have been carried out against American companies.

Today, Amazon published the following emphatic denial:

Today, Bloomberg BusinessWeek published a story claiming that AWS was aware of modified hardware or malicious chips in SuperMicro motherboards in Elemental Media’s hardware at the time Amazon acquired Elemental in 2015, and that Amazon was aware of modified hardware or chips in AWS’s China Region.

As we shared with Bloomberg BusinessWeek multiple times over the last couple months, this is untrue. At no time, past or present, have we ever found any issues relating to modified hardware or malicious chips in SuperMicro motherboards in any Elemental or Amazon systems. Nor have we engaged in an investigation with the government.

There are so many inaccuracies in ‎this article as it relates to Amazon that they’re hard to count. We will name only a few of them here…

Amazon employs stringent security standards across our supply chain – investigating all hardware and software prior to going into production and performing regular security audits internally and with our supply chain partners. We further strengthen our security posture by implementing our own hardware designs for critical components such as processors, servers, storage systems, and networking equipment.

Security will always be our top priority. AWS is trusted by many of the world’s most risk-sensitive organizations precisely because we have demonstrated this unwavering commitment to putting their security above all else. We are constantly vigilant about potential threats to our customers, and we take swift and decisive action to address them whenever they are identified.

Apple has issued its own denial as well.

The Bloomberg article goes on:

The companies’ denials are countered by six current and former senior national security officials, who—in conversations that began during the Obama administration and continued under the Trump administration—detailed the discovery of the chips and the government’s investigation. One of those officials and two people inside AWS provided extensive information on how the attack played out at Elemental and Amazon; the official and one of the insiders also described Amazon’s cooperation with the government investigation. In addition to the three Apple insiders, four of the six U.S. officials confirmed that Apple was a victim. In all, 17 people confirmed the manipulation of Supermicro’s hardware and other elements of the attacks. The sources were granted anonymity because of the sensitive, and in some cases classified, nature of the information.

One government official says China’s goal was long-term access to high-value corporate secrets and sensitive government networks. No consumer data is known to have been stolen.

The ramifications of the attack continue to play out. The Trump administration has made computer and networking hardware, including motherboards, a focus of its latest round of trade sanctions against China, and White House officials have made it clear they think companies will begin shifting their supply chains to other countries as a result. Such a shift might assuage officials who have been warning for years about the security of the supply chain—even though they’ve never disclosed a major reason for their concerns.

How believable is this story? Some possible scenarios:

  1. If it is false, one possibility from a political perspective is that this story was manufactured by someone in the Trump administration or whom is otherwise motivated to advance US protectionist trade policies. This story increases FUD regarding essentially all modern technology infrastructure. However, such an effort would seemingly have required at least somewhat coordinated work of the “17” sources Bloomberg cited.
  2. If it is true, then why/how could Amazon and Apple plainly deny it? Unless there are logical exemptions in their denials due to intentionally specific choices of language, one possibility is that the PR staff responsible for issuing these denials are not in the loop on what happened. How could that be the case? I don’t know, unless this response is somehow being coordinated at very high levels due to overriding national security concerns.

It seems, at least, unusual to have such a seemingly deeply-reported story from a reputable publication be so flatly denied by Amazon and Apple. There are surely many questions unanswered by the public statements of those involved. Because this is a potential matter of national security, the completeness of information available to the public is likely to be low.

We will follow up if/as additional information comes forth.