In a development that has potential to disrupt the digital advertising ecosystem, the two “walled gardens” of the digital advertising ecosystem-Meta and Amazon-have decided to join hands to boost their business and advertising channels.
Meta last week launched a new feature that allows users in the US to link their Facebook and Instagram accounts to Amazon so they can buy goods by clicking on Instagram and FB ads and check out with Amazon without leaving the social media apps. The move has stumped the media and advertising sector globally.
The new in-app shopping feature, announced in a blog post, will be available on select products advertised on Facebook or Instagram and sold by Amazon or by independent sellers on its platform. It is not yet clear when this feature will be available in India and other countries.
“It is the most significant ad product of the year,” Rahmey, former Facebook client solutions manager, wrote on his LinkedIn post, adding, “While additional details are still scarce, this partnership could be a massive revenue opportunity for Meta, Amazon and most importantly, advertisers.”
Responding to Rahmey's post, client solutions manager for e-commerce at Meta, said on LinkedIn that the new shopping service “was a long process in the making and a huge deal.”
Although the feature is yet to be launched globally, it is being dubbed as the “upcoming disruptor” which has the potential to dent Google’s business model, primarily Search.
Amazon’s online ad business has been more like “intent-based,” meaning customers search with keywords to find the items they want. Meta has more of a “discovery-based” model in which people can receive targeted ads without searching. Amazon doesn’t have social media apps and Meta lacks an ecommerce platform. They complement each other and hence their partnership will go a long way, industry leaders say.
Anil Solanki, Senior Director, Media Lead, dentsu X, said, “This partnership opens up a realm of opportunities, reshaping the landscape for digital advertising and ecommerce.”
“Their collaboration strengthens first-party data for both Amazon and Meta, offering valuable insights into user preferences and behaviours. This partnership presents substantial opportunities for advertisers, leveraging the combined user base and data capabilities of Amazon and Meta for more targeted and impactful advertising,” Solanki adds.
However, many experts wonder whether it's just a “product integration” between the two giants or their partnership includes “data integration” as well. “The latter opens up many more possibilities, beyond the better sales and conversion rates. They will corner more ad revenues and offer better personalisation and collaborative ad formats.”
Win-win for Meta and Amazon
Meta may have abandoned its efforts around live shopping on Facebook and Instagram, but Mark Zukcerberg still believes in his apps’ potential as a shopping platform.
Shradha Agarwal, co-founder and CEO of Grapes, explains, “Currently, sales on Amazon are being driven only with the ads which are being shown on the etailer platform in general. People who don't have their own D2C platform, drive traffic from outside to Amazon also. But a lot of brands, who have their own e-commerce channels, are using Facebook and Google to drive performance and sales on their platform. So, the chunk of sales that is going outside Amazon to an individual brand store will also help in coming with this perspective and it will improve the overall conversion rate pushing more sales for Amazon,” Agarwal says.
First party data
The collaboration between the two tech giants could further involve the exchange of massive first-party data, enhancing user targeting capabilities and providing valuable insights for advertisers, industry experts say. Though both the giants have maintained a silence over this crucial matter.
If Amazon starts sharing user data with Meta, then if I want a diaper buying audience whose data is only with Amazon they will be able to help me select that data on Facebook and then run ads only on those audiences only. This can be a brilliant partnership if possible. And it will open up the lower funnel for our advertisers because it's a great opportunity, says Agarwal.
“If partnership extends to user data sharing, Meta and Amazon can sidestep any difficulties posed by Apple's App Tracking Transparency policy. This synergy could potentially redefine the landscape of targeted advertising within walled gardens,” Ashish Shah, Founder & CEO, Vertoz.
It's a game changer for almost all the advertisers in the e-commerce space, especially small businesses in India, remarks Sumon K Chakrabarti, Co-Founder and CEO, Buffalo Soldiers.
“This integration provides much-needed respite to those players who could not create a proper D2C website that is well optimized for conversions and instead opt for the Amazon product page as their point of sale. This feature should also hopefully open the gates to creating a very valuable cross-platform audience sharing capability adding a sharp edge to the retargeting strategy of all e-commerce advertisers,” he noted.
Will this uptick their ad revenues?
Meta has been looking for new ways to bolster ad revenue after Apple’s iOS privacy changes in 2021 made it more difficult for social media companies to target users. The update was a major blow to Meta’s business and, alongside a brutal digital ad market, pushed the stock down 64% last year.
Following three straight quarters of revenue declines, the business has bounced back this year, lifting the Meta stock by more than 160%. Meta has invested a lot in artificial intelligence as a key technology to boost its SMB advertising offerings.
Amazon has also been ramping up its ad business for the last few years, luring SMBs looking to improve their placement on the company’s apps. Amazon said last month that sales in its online ad business grew 26% from a year earlier in the third quarter to $12.06 billion.
In India, Meta’s ad revenue for FY2023 was Rs 18,300 Cr. Amazon is yet to submit its financial report for FY23, but in FY22, it earned close to Rs 4,100 cr of ad revenue, which is about 9 percent of India’s total digital ad spend. Together they command more than Rs 25,000 Cr of ad revenue, which is roughly equivalent to 50 percent of India’s total digital AdEx.
Chakrabarti opines, “The partnership revolutionizes Meta Ads for small to medium sized advertisers (SMBs), removing the dependence on a D2C website. Simple Amazon products can now be leveraged to generate sales. It will also change and improve the retargeting strategies wherein advertisers now would be able to utilise audiences such as the Amazon converters or product page visitors. It will also address the issue of cross-platform (between Meta and Amazon) conversion tracking. This will enable advertisers to utilise the time-tested Meta Sales campaigns because now the conversion feedback loop would be completed.”
He however cautions that we must wait and watch out for the practical use cases once it is rolled out globally.
Vikram Bhalla, Founder and Director of Vivify Asia feels that the Meta-Amazon bonhomie will create “shopping with context”.
“From group discussions to purchase without a drop, for example, someone discussing audio equipment in an audio group will have a link next to a favorable discussion. Influencers will be used with more efficacy this way. This will increase the efficacy of advertising as the expected drop of a non-seamless purchase will be eliminated allowing the ultimate impulse buying. This will give advertisers the ability to create influencer led campaigns with a higher chance of closing sales,” Bhalla pointed out.