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Amazon DSP on the rise

Amazon is one of the dominant players in the digital advertising market – will this soon be the case in Europe too? With strong growth rates, exclusive first-party data, and innovative advertising inventories such as Prime Video and Twitch, Amazon DSP is becoming increasingly important. But what opportunities and challenges does this development bring for advertisers? A look at the dynamics and potential of an advertising system that should not be underestimated.
A demand-side platform (DSP) is a technology platform that enables advertisers to purchase digital advertising space automatically and in real time. It provides access to various advertising networks and enables targeted ad delivery based on data and algorithms. This allows advertising campaigns to be designed more efficiently and in a more targeted manner.

The global significance of Amazon

As a classic walled garden, Amazon has so far been of little significance to domestic companies, unless they have used Amazon itself as a sales channel. Amazon generated tentative interest last year when it opened Prime Video to advertising.
A look at the global advertising market shows total annual spending of US$700 – 750 billion. More than half of this spending is accounted for by just four digital companies: Google, Meta, Amazon Advertising, and – in fourth place, far behind – Microsoft, which only achieves about 6% of Google’s revenue.

Amazon Advertising is also far behind Google with approximately $50 billion in revenue, but it is showing impressive growth rates averaging over 20% annually. Only about 8% of revenue is currently generated in Europe, which may not sound like much at first, but for Amazon Advertising, Europe is an important growth market that is still in its infancy.

What influence does Amazon’s size have on the advertising market?

The question arises as to whether size alone is significant for the advertising market. Unfortunately, the answer is yes, it has a considerable influence.
The basic capabilities of a DSP are essentially comparable across almost all DSPs commonly used in Europe. However, there is a fear that a changed data protection framework will tend to reward walled gardens. Where the big players operate on their own platforms or manage existing data exclusively, data can be collected more easily and used more effectively, even under stricter data protection guidelines. Systems without original data will find it increasingly difficult to differentiate themselves. They may have to form national data and platform alliances to compensate for this.

What’s more, it should be noted that the above figures from Amazon refer only to the advertising division. Amazon as a whole generates annual sales of just under $600 billion. Amazon therefore has enormous opportunities to invest in artificial intelligence, automation, usability, and better user experience. As a thoroughly technology-driven company, Amazon will always be quick to integrate innovations into its advertising division.

Advantages of Amazon DSP

Forrester Research awards top marks to Amazon DSP alongside Google – particularly in the areas of audiences, insights/analysis, and strategic alignment. And it is precisely these points that will become increasingly important in the future:

• Purchase data is highly valid and provides the best opportunities to reach a suitable target group, especially since Amazon, as the largest online store in Austria, has many and, above all, regular data points. This data is also protected, and it seems unrealistic that Amazon could ever be forced to share it with third parties.
• Similar to Google, Amazon not only has many of its own exclusive inventories (Amazon Shop, Prime Video, Twitch, etc.), but also technical platforms (shop, its own devices such as Echo or Fire TV, app, etc.). This makes networking much easier and constantly opens up better opportunities to collect and link data and make it more valuable for advertisers.
• The ability to collect and automatically analyze (campaign) data will continue to grow in importance. Better insights ultimately lead to ever-improving campaign results. The major platforms are increasingly developing their advertising interfaces into simple „layman’s tools” that apparently allow advertisers without any special media knowledge to set up campaigns themselves with just a few clicks, define goals, and leave the optimization to the system. However, it takes a lot of know-how to interpret data and further optimize campaign setups. The data and insights provided by the platforms are therefore particularly important for those who can work with them professionally.
• The ability to adapt to a highly dynamic market is largely determined by the speed at which the system can be developed – and Amazon has enormous resources at its disposal in this regard. Any legal or technical changes in the European market could even increase the technical advantage of the major players. Unfortunately, this is compounded by a rather negative attitude towards new technologies in Europe. Technology giants such as Google and Amazon will be able to introduce innovations from the US that have already been developed and tested more easily and quickly in Europe. Unfortunately, European technologies also have the disadvantage that European politicians have so far largely ignored the interests of the advertising industry in the current debate on data protection.

Weaknesses of Amazon DSP

Where there is light, there is always shadow. Despite all its innovative strength, we currently see a few points that are still critical:

• At present, Amazon DSP still has a few teething problems or quirks here and there, which is not surprising, especially since the technology is still quite new. Many features are constantly being tested and then discontinued. This requires close monitoring of campaigns.
• Amazon generally follows very strict internal guidelines regarding advertising content and advertised products. The same applies to the design options for advertising. In practice, this leads to a trial-and-error process for advertising materials and longer lead times. It is therefore impossible to say in advance whether advertising materials will be accepted.
• In addition, as an international corporation, Amazon provides first-level support abroad, which complicates some things here, as there are not only automated but also manual checks.
• Amazon’s size automatically makes domestic customers with their budgets more or less „C customers”. This affects the support of the platform itself, but also the opportunities for customers to gain access to the DSP in the first place. The chances of customers influencing features or requesting enhancements are virtually non-existent. Amazon is managed centrally for the global market. European providers are certainly more flexible in terms of smaller markets and specific characteristics in Europe.
• Amazon only allows third-party systems to track certain aspects. This makes integration into an existing setup difficult if you want to track familiar KPIs consistently.

Current benefits of Amazon DSP for brands and recommendation

Some may still consider Amazon irrelevant to the advertising market today, but Amazon DSP already offers companies an effective way to reach their target groups precisely and efficiently, provided there is a suitable task. For brands, this can be the case in the following three scenarios:

Use of exclusive Amazon Prime inventories:

The TV market is becoming increasingly fragmented, with young users in particular increasingly watching on-demand video. Currently, 29% of people over the age of 14 use Prime Video at least one day a week (source: Study on video usage throughout the day 2024, GfK Austria).
Nevertheless, inventory is still very limited and TKPs are very high. Traditional TV cannot replace Amazon Prime.

Use of exclusive Twitch inventories:

Twitch mainly serves very young target groups, which are usually difficult to reach. Currently, an estimated 22% of 14-30-year-olds use Twitch at least one day a week. Users over the age of 30 are less common on Twitch (source: Study on moving image usage throughout the day 2024, GfK Austria, own projection by adverserve).

Use of special Amazon purchase data:

This allows you to model your own target group and run video or display campaigns based on this.

Amazon DSP is not yet recommended as a primary DSP, as a complete system change cannot be recommended at this time. However, Amazon DSP is certainly suitable as a secondary or tertiary DSP. In any case, the digital advertising market will have to get used to greater technical fragmentation and thus to multi-DSP architectures. Unfortunately, we have to burst the bubble of the dream of a central DSP, a meta-DSP, or even a complete tech stack from a single provider at this point.

We currently classify Amazon DSP as a very dynamic technology in the advertising market that needs to be monitored further. It remains to be seen whether Amazon DSP will play a more central role in the digital advertising market in Europe in the future.