Amazon's Ad Program Could Augment Revenue Growth

| About: Amazon.com, Inc. (AMZN)

Recently, Amazon (NASDAQ: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 (NASDAQ: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.