Amazon's Ad Program Could Augment Revenue Growth

Recently, Amazon (AMZN) unveiled a new Beta program that allows publishers (bloggers, etc) to embed ads among the web page's text which will link to Amazon products. The new product, dubbed "Context Links" is available to registered Amazon Associates and requires some additional code to be added to the publisher's web page, which then matches text content on the page to relevant Amazon products that consumers can buy. The publisher receives a referral fee - see an example here.

The program is designed to bring incremental revenue to content creators, as well as Amazon. The new Context Links format allows publishers to customize: the number of links per page, the portion of the page that is linked, which Amazon products are linked, the format of the link to discern it as an ad, and whether previews appear upon mouse overs. Amazon benefits upon increased sales as well as the branding of Amazon every time there is a "mouse over."

Amazon has been expanding further away from pure retail and more into the advertising space (i.e. Click River.) Now Amazon maybe encroaching on Google's (GOOG) "in text" advertising trials, which were part of its pay per action announcement last week.

The financial impact in 2007 should be negligible, but the ultimate impact would be felt by the number of Associates that sign up, each referral made, the sell through rate, and the spiff. However, longer term, the company may be able to leverage is large user base/associate program to augment revenue growth. The question on this type of advertising will be the reaction by consumers -- whether they think it is helpful or intrusive.

Comments

[Stockerblog:]

This is a great article. I wrote an article last month of the 12 reasons why Amazon stock should be up substantially this year ( stockerblog.blogspot.c... ), and I didn't even mention context ads. I think you are underestimating the potential of their context ads. With Google, all AdSense ad clicks are directed to the external websites of the companies that are advertising. With Amazon, all their context ads are directed back to Amazon.

2007 Apr 03 08:06 PM

[Asia East:]

I applied for Google ads and was turned down. Google said I have copyright material on my website, so they won't advertise there. So now I'm apply for Amazon ads as a way to make money.
But it raises several questoins. Why would Google take that stand? Does that mean any blog out there with Google ads isn't really protected from copyright infringement?
I basically promote books for free. I have written consent from the authors of those books to display them in my online bookstore. So I'm not worried about anything. Just curious. Will Amazon also turn me down?

2008 Apr 30 09:40 PM