Amazon.com has been accused of profiting from an unfair advantage in the past because it wasn't compelled to collect sales taxes in some states in which other retailers were required to do so. It has also been recognized that Amazon's operating model gives it a pricing advantage over competing brick and mortar stores. Now, Jeff Bezos and company have come up with another means to generate revenue with the stated intention of lowering the prices of goods it sells — advertising.
One of the first indicators of Amazon's direction came in April when Mr. Bezos addressed a letter to consumers to explain how the company was able to offer Kindle at a lower price.
"We took our bestselling Kindle and made a version with special offers and sponsored screensavers. Companies sponsor the screensavers, you pay less for the Kindle," Mr. Bezos wrote. "Plus you receive offers directly on your Kindle that can save you more money, such as a $20 Amazon Gift Card for $10, six Audible Books for $6, and an album from Amazon MP3 Store for $1."
Lisa Utzschneider, Amazon's global head of advertising, recently told Ad Age, that the company offers marketers opportunities across its "ecosystem," including via products such as the Kindle, company websites (Amazon.com, Diapers.com, Zappos.com, etc.), and Amazon's international platform with sites in North America, Europe and Japan.
Ms. Utzschneider said data shared with advertisers is a major strength of the Amazon platform.
"We have pretty advanced targeting capabilities. They fall into two buckets — one is lifestyle and one is in-market," Ms. Utzschneider told Ad Age. "Lifestyle is the broader part of the funnel and consists of categories like fashionista, gadget geek, mom or coffee enthusiast. Further down the funnel within categories — has this person looked at consumer electronics products? That's the kind of audience segment information that we share."