Amazon Knows What You Buy. and It’s Building a Big Ad Business from It.

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From The New York Times:

When a chain of physical therapy centers wanted new patients, it aimed online ads at people near its offices who had bought knee braces recently on Amazon.

When a financial services provider wanted to promote its retirement advisory business, it directed ads to people in their 40s and 50s who had recently ordered a personal finance book from Amazon.

And when a major credit card company wanted new customers, it targeted people who used cards from other banks on the retail site.

The advertisers found those people by using Amazon’s advertising services, which leverage what the company knows better than anyone: consumers’ online buying habits.

“Amazon has really straightforward database — they know what I buy,” said Daniel Knijnik, co-founder of Quartile Digital, an Amazon-focused ad agency that oversaw the ads for the clinics and retirement services. “For an advertiser, that’s a dream.”

Ads sold by Amazon, once a limited offering at the company, can now be considered a third major pillar of its business, along with e-commerce and cloud computing. Amazon’s advertising business is worth about $125 billion, more than Nike or IBM, Morgan Stanley estimates. At its core are ads placed on Amazon.com by makers of toilet paper or soap that want to appear near product search results on the site.

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But many ad agencies are particularly excited by another area of advertising that is less obvious to many consumers. The company has been steadily expanding its business of selling video or display ads — the square and rectangular ads on sites across the web — and gaining ground on the industry leaders, Google and Facebook.

In addition to knowing what people buy, Amazon also knows where people live, because they provide delivery addresses, and which credit cards they use. It knows how old their children are from their baby registries, and who has a cold, right now, from cough syrup ordered for two-hour delivery. And the company has been expanding a self-service option for ad agencies and brands to take advantage of its data on shoppers.

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Many of Amazon’s features are similar to those of Google or Facebook, like offering ways to target users based on their interests, searches and demographics. But Amazon’s ad system can also remove a lot of the guesswork by showing ads to people who have bought the shirts on Amazon.com.

Advertisers have long run some targeted campaigns through Amazon’s ad network. Many have done that by working directly with Amazon’s staff, who would place their orders on their behalf. That option has historically been focused on larger brands because it requires a minimum advertising commitment. Over time, Amazon has given more advertisers and their agencies access to the self-service system to run their own targeting campaigns on and off Amazon’s websites, and at a variety of spending levels.

Users of the self-service system can choose from hundreds of automated audience segments. Some of Amazon’s targeting capabilities are dependent on shopping behaviors, such as “International Market Grocery Shopper” and people who have bought “Acne Treatments” in the past month, or household demographics, such as “Presence of children aged 4-6.” Others are based on the media people consume on Amazon, such as “Denzel Washington Fans” or people who have recently streamed fitness and exercise videos on Amazon. The company declined to comment.

Just the Cheese, a company in Reeseville, Wis., makes crunchy dried cheese bars that have taken off as a low-carb snack. By using algorithms to analyze how Just the Cheese’s search ads performed on Amazon’s site, the ad agency Quartile Digital noticed that people who searched for keto snacks and cauliflower pizza crust, both low-carb diet trends, also bought a lot of cheese bars. So Quartile ran display ads across the web targeting Amazon customers who had bought those two specific product categories. Over three months, Amazon showed the ads on websites more than six million times, which resulted in almost 22,000 clicks and more than 4,000 orders.

That 20 percent conversion rate — a sale to one out of five people who clicked on the ads — was “amazing,” Mr. Knijnik said. “That is the kind of powerful granularity for building the target audiences that just Amazon can give you.”

Link to the rest at The New York Times