Amazon’s Strategy for a Joyous Holiday Season: Discounts, Same-Day Delivery, and Artificial Intelligence
Amazon plans to utilize generative AI as its hidden advantage during the upcoming holiday season. By harnessing the vast data from over 160 million Prime subscribers, the company aims to enhance ad targeting and enable merchants to swiftly create promotions.
In addition to fast shipping and the usual Black Friday and Cyber Monday discounts, the company is betting that targeted ads powered by artificial intelligence (AI) will attract more buyers and advertisers to its platform.
Amazon CEO Andy Jassy said on a call with analysts on Thursday that machine learning will help the company deliver more relevant ads to shoppers.
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“When (advertisers) have to think about budget decisions, they choose (ads) that have high volume and that perform better. I think both are real advantages in our advertising space right now,” Jassy said.
This week, the company said it is using generative artificial intelligence to create better product images for advertisers and drive more eyeballs to third-party sellers’ products. The tool creates background images for products based on product information.
Amazon isn’t the first online retailer to use AI for advertising, but given its scale, Amazon’s use is expected to increase adoption of the strategy.
The main benefit of generative AI is its “ability to show the user dozens, if not thousands, of customized variations of your ad,” said Swiftly Chief Revenue Officer Andy Friedland, Amazon’s former head of advertising. Swiftly is a retail technology platform.
He said creating different ads for different audiences can be expensive and expects Amazon’s AI tools to save money for advertisers.
Brendan Witcher, principal analyst at Forrester, said Amazon’s creative AI ad tool is “good at attracting and retaining a segment of third-party sellers and brands that advertise on Amazon.”
Other companies, such as Ascendly Marketing, use generative AI imaging tools that match images of celebrities to products. In a recent AI-generated campaign, deceased singer Elvis Presley is holding Ascendly’s customer Fast Passports and Visa products.
Adding “funny pictures” like this has increased social sharing significantly, Ascendly president Marshal Davis said. His clients are seeing an uptick in sales and Google click-through rates, a trend Amazon wants to see in its own generative AI ad tools during the holiday season.
Analysts expect Amazon’s advertising business to earn $14.2 billion during the holiday quarter, compared with $11.56 billion a year earlier, according to LSEG estimates.
An AI image generator could encourage hesitant shoppers to open their wallets if targeted products are more relevant, Friedland said.
Amazon’s Prime membership, which costs $14.99 a month or $139 a year, creates a “huge advantage” in advertising and better targeting of shoppers, leading to more frequent purchases, Witcher said.
“Traffic volume is a critical part of online advertising success,” he said.
Amazon forecasts holiday quarter revenue of $160-167 billion, compared to analysts’ forecasts of $165.6 billion. Amazon’s turnover in the last quarter of last year was 149.2 billion dollars.
Amazon’s AI imaging threatens smaller advertising firms and freelancers focused on graphic design, Ascendly’s Davis said.
If widely adopted, Amazon’s AI tools could also have another downside: producing ads with similar images for different products, making it harder for sellers to stand out.
“This can make it difficult for brands to differentiate themselves from each other,” Davis said.
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