The Corner Newsletter: September 08, 2022
Welcome to The Corner. In this issue, we explore Amazon’s rapidly growing online advertising business, fueled by its cloud services monopoly and already threatening traditional players Google and Facebook.
Amazon Exploits its Cloud Monopoly to Build Advertising Business
Karina Montoya
For much of the last decade, Google and Facebook have dominated the online advertising market, capturing more than half of U.S. digital ad spending and attracting a major antitrust lawsuit by a coalition of state attorneys general. But in recent years Amazon has steadily built up its own earnings from selling ads, and new ad tech tools that leverage Amazon’s dominance of cloud services look likely to speed the corporation’s efforts to grab a bigger share of this business.
Launched in June, the company’s latest ad tech tool, Amazon Marketing Stream, will automatically stream real-time performance data on client Amazon Web Services accounts in ways that will, Amazon says, empower them to better manage their marketing budgets. Some marketing agencies rushed to celebrate this new feature, which is designed to provide them with as much performance data for their Amazon ad campaigns as they get with Google’s ads.
The move into advertising has already proven to be extremely lucrative for Amazon. The corporation’s advertising revenues hit $31 billion last year, and its second quarter revenues this year rose 21 percent year on year to $8.7 billion, putting Amazon on pace to close 2022 with at least $37 billion in this business segment. As recently as 2016, Amazon earned only $1.4 billion from advertising.
Initially, most of Amazon’s advertising revenue was extracted from sellers on its marketplace, who were often all but required to buy advertising in order to sell their goods. More recently, however, much of this growth appears to have been generated by Amazon’s leveraging of its dominant position over cloud services, where Amazon Web Services (AWS) holds at least a 48 percent market share globally.
As Business Insider reported earlier this year, ad industry executives say that AWS will play a key role in Amazon’s ad business growth through a product called Amazon Marketing Cloud (AMC). Launched in 2021, AMC is known as a “data clean room” in cloud services jargon. It’s a space where advertisers can pool anonymized data on existing and potential customers to see how their campaigns on and off Amazon overlap. For example, brands can use AMC to continuously optimize their spending budgets by mixing insights from their first-party data with Amazon’s own behavioral shopping data to place ads across the web.
Also in June, the corporation introduced Amazon Marketing Cloud Insights on AWS, a tool that makes it easier to use AWS to store, analyze, and visualize reports that would otherwise take weeks to pull separately. In August, The Information reported that AWS is preparing to unveil Bastion, which will allow multiple companies to pool their own anonymized customer data to see how it overlaps not only with Amazon’s own insights, but with each other. That way, a retailer like Target could see how many of its customers share similarities with those of HBO Max or Hulu, and use those insights to sell products to consumers and seek new customers.
As Google and Facebook are being scrutinized for their use of third-party data to consolidate market power, “data clean rooms” are gaining popularity among advertisers as a way to continue targeting ads across the web without violating privacy laws. While these days most of the tech press is excited with Apple’s emerging growth in mobile advertising, the real story in this sector increasingly looks to be Amazon’s efforts to leverage its many existing monopolies to manufacture yet another chokehold on American democracy.
Open Markets files Amicus Brief - Genius v. Google
On Thursday, the Open Markets Institute filed an amicus brief in Genius v. Google supporting a petition by Genius asking the Supreme Court to hear the case. Genius is a website that displays transcribed song lyrics, and the litigation concerns Google’s large-scale appropriation (or “scraping”) of content compiled and presented by Genius and other firms. Genius obtains copyright licenses from artists and labels and hires workers to transcribe song lyrics. In violation of its contractual agreement with Genius, however, Google copies Genius’s transcriptions of song lyrics and presents them as its own property in search results. The brief argues that the Court of Appeals for the Second Circuit erroneously ruled that the Copyright Act bars Genius’s breach of contract claims against Google, thereby essentially authorizing Google’s ongoing theft of Genius's content.
The brief argues that by taking the case, the Supreme Court could clarify the law and allow companies like Genius to protect themselves through contract law against unfair free-riding by digital giants like Google.
📝 WHAT WE'VE BEEN UP TO:
Luke Goldstein published an article in Washington Monthly calling on Transportation Secretary Pete Buttigieg to penalize airlines for purposefully overbooking flights. “The secretary needs to use his powers. Section 411 of the Federal Aviation Act, for example, grants the secretary of transportation the authority to ‘investigate and decide whether an air carrier, foreign air carrier or ticket agent has been or is engaged in an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation,” writes Goldstein.
Open Markets Institute senior fellow Johnny Ryan filed a class action suit against Oracle for unlawful data collection. His involvement was discussed in Tech HQ, WebProNews, and Security Week.
Claire Kelloway was quoted in The Washington Post on the corporate profiteering behind rising meat prices: “There is a big difference between what consumers pay and what ranchers receive. You have the price of beef skyrocketing to record levels, and yet the price ranchers receive has gone down. The processors, though, have gained astronomical profits.”
Farm Progress noted Open Markets Institute’s recent comments to the USDA in favor of proposed rules within the poultry industry in a roundup of feedback. A similar Open Markets agricultural report was also cited in Desert News.
In an article describing the stalled state of antitrust progress in America versus Europe, ProMarket cited Barry Lynn as saying that the minds of U.S. antitrust officials have been captured.
Local News Initiative quoted Nikki Usher, OMI fellow and author of News for the Rich, White and Blue, in an article about news deserts. They were quoted as saying that the vast majority of venture and philanthropic money was going to outlets located in major urban areas and not to communities lacking a critical mass of reporters.
Forbes listed Open Markets Institute among groups that signed a letter urging Congress to look into warehouse safety at Amazon.
🔊 ANTI-MONOPOLY RISING:
European Commission antitrust enforcers this week sued to block a merger between Illumina and Grail, even though the two gene-sequencing companies did no business in Europe. E.U. antitrust enforcement is said to be expanding its reach due to a new antitrust review standard adopted last year allowing member states to request scrutiny of a merger even if the companies involved are not concentrated in the eurozone market. (New York Times)
The Department of Justice said China International Marine Containers Group late last month abandoned its acquisition of Maersk Container Industry and Maersk Container Industry Qingdao following an investigation by its Antitrust Division. DOJ says the merger would have consolidated control of over 90% of the world’s insulated container box and refrigerated shipping container production in Chinese state-owned or state-controlled entities. (DOJ)
📈 VITAL STAT:
$120 Million
The amount the tech industry has spent on political ads since the beginning of 2021, the vast majority of it targeting the American Innovation and Choice Online Act (AICOA), which would seek to reign in the deceptive practices of the dominant tech platforms. (PYMNTS)
📚 WHAT WE'RE READING:
“Politico’s new German owner has a ‘contrarian’ plan for American media.” (The Washington Post, Sarah Ellison). A profile of Mathias Döpfner, CEO of Axel Springer describes how he became the newest billionaire media mogul and his vision for media brands Politico and Business Insider in a journalism landscape that keeps consolidating.
“Mark Zuckerberg’s Metaverse Pitch Is Falling Flat.” (Bloomberg, Max Chafkin). The witty account of the pitfalls of Facebook's proposed new business model, the metaverse, making the case for why its advertising business is still key to its social media dominance.
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