Amazon’s latest retail media announcement – offering its advertising technology to other retailers – might seem like asking competitors to invite the fox into the henhouse. With Amazon already controlling nearly 75% of retail media spend according to eMarketer, and a history of retailers avoiding Amazon’s AWS cloud hosting technology due to competitive concerns, the proposition appears audacious.
Yet the retail behemoth could still find willing partners, particularly among mid-sized and smaller retailers looking to jumpstart their retail media aspirations.
The bull case
Despite the apparent audacity of Amazon’s proposition, the retail behemoth may still find willing partners, particularly among mid-sized and smaller retailers looking to jumpstart their retail media aspirations. The potential benefits of the new “Amazon Retail Ad Service” are twofold.
First, access to Amazon’s massive pool of advertisers – iHerb, one of the beta partners, already shares 1,200 advertisers with Amazon. “This innovative solution and proven technology allow us to deliver more relevant and personalized ads to our shoppers,” says Neil Folgate, SVP of Global Marketing at iHerb.
Secondly, the value proposition includes a battle-tested technology stack that’s powered Amazon’s growth to a $50 billion advertising business.
Amazon launched its self-serve Sponsored Products ad type back in 2014, and rapidly built a large ecosystem of advertising technology that ranges form bottom-of-funnel retargeting all the way to complex Connected TV ad buys. Amazon’s tech capabilities are unmatched among other retailers. Accessing these advanced tools and insights could level the playing field for other retailers, who would otherwise find these capabilities out of reach.
Amazon also promises access to its extensive portfolio of advertisers, which drove $14BN in revenue for the company in Q3 2024. This means retailers get a running start among advertisers already eager to spend money.
For skeptics who see this as a Trojan horse strategy, there’s a successful precedent with another major ecommerce player: Instacart. Instacart’s Carrot ads platform has shown how a potential competitor can become a valuable infrastructure partner for retailers, if the value proposition is strong enough. Thrive Market, The Fresh Market, and Schnucks are grocery retailers that have partnered with Carrot Ads.
The Data DilemmaHowever, data concerns loom large. “Amazon isn’t just selling AdTech – it’s selling dominance in the retail media ecosystem,” said Mikael Brakker, L’Oréal Luxe’s Europe Zone E-Commerce Director in a LinkedIn post. “You can be sure they’ll weaponize the data,” he warns.
Many retailers including Walmart, Target and Kroger already avoid using AWS to host their websites. Walmart has been the most vocal about this choice being driven by competitive concerns, even asking its vendors to stop using the technology. The Home Depot has generally kept customer-facing infrastructure off AWS.
This partnership could be considered be even more intimate, even though Amazon says it will keep retailers’ data separate from Amazon’s data via the use of clean rooms.
A Question of Scale
The opportunity may end up splitting along size lines.
“The big question for retailers, do they want to rely on the tech and support one of their biggest competitors?” says Roger Dunn, Global Retail Media Lead at Diageo. “Larger players are unlikely to go there, but for smaller players, this might just be the aggregation play that helps them unlock a meaningful ad business, without the need for a large investment in team and tech.”
“Established retailers won’t adopt this,” said the Head of Retail Media at a major category retailer on LinkedIn.
Threading the Needle
Amazon is attempting to thread a delicate needle. The platform promises data separation through AWS Clean Rooms, producing only aggregated, anonymized reports. And Amazon’s sophistication in retail media tech is unmatched. Drew Habeck, SVP of Media at Omnicom’s Flywheel agency, emphasizes the benefits: “The consistent measurement, reporting and purchase data across different retail platforms is incredibly insightful for campaign performance and optimization.”
The strategy mirrors Google’s democratization of programmatic advertising. By removing barriers around cost, time, and talent, Amazon could expand the retail media pie significantly.
For retailers considering the partnership, the calculus is complex. The immediate benefits – sophisticated ad tech, access to major advertisers, and proven measurement capabilities – must be weighed against long-term strategic concerns about data control, competitive positioning, and ultimately giving the industry’s largest competitor a leg up.
The move also poses an existential challenge for retail media tech vendors like Criteo and Epsilon who have built businesses helping retailers establish their ad platforms — as well as a new breed of providers like Koddi, Pentaleap, and Topsort. Amazon’s entry into this space, with its massive scale and established advertiser relationships, could reshape the competitive landscape for ad tech providers.
Success will likely depend on Amazon’s ability to maintain clear boundaries and demonstrate value while respecting retailer independence. Amazon’s bold bet could either accelerate the democratization of retail media or cement its dominance in yet another digital arena. For now, the industry watches with a mix of interest and trepidation as the strategy unfolds.
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