The strategy is seen to give Amazon’s own devices an edge, which the company sees as central to building customer loyalty. The strategy, however, puts other gadget makers who rely on Amazon’s site for a significant share of their sales at a disadvantage.
Amazon routinely lets other companies buy ads that appear inside search results, including searches for competing products. These represent a lucrative part of the company’s business.
Some of the companies, however, who have products that directly compete with Amazon’s own are being prevented by from buying sponsor-product ads tied to searches for Amazon’s own devices, such as Fire TV, Echo Show and Ring Doorbell, according to some Amazon employees and others familiar with the policy.
Examples include products from Roku Inc., maker of devices that stream content to TVs, similar to Amazon’s own Fire TV, which cannot even buy Amazon ads tied to its own products.
Even other tech giants have experienced issues with Amazon. Facebook has encountered issues when trying to advertise its own voice-activated smart displays. Google, on the other hand, had been blocked by Amazon from selling its Chromecast streaming devices, which compete with Amazon’s Fire TV.
Amazon’s barring of these companies from advertising shows the conflict between the e-commerce platform that Amazon initially built its business upon and its growing role as a product manufacturer in its own right.
Traditional retailers buy inventory from manufacturers and resell it to consumers, limiting the number of vendors they can work with. Amazon, on the other hand, has more than a million businesses and entrepreneurs selling directly to Amazon shoppers. The company currently accounts for 38 percent of all online shopping in the U.S., with roughly half of all online shopping searching in the country starting on Amazon.com.
Amazon’s device business is stated to be a priority of CEO Jeff Bezos, who sees it as a way of building customer loyalty. (Related: Pandemic profiteering: Watchdog accuses Amazon of price gouging as Bezos’ wealth soars to $200 billion.)
“When somebody buys an Amazon device, they become a better Amazon customer,” said Dave Limp, who heads the company’s devices business, in an interview last year. Limp explained that the company can build services attached to those devices, enabling it to sell the gadgets at a low price.
“We don’t have to make money when we sell you the device,” he said.
In response to a request for comment by the Wall Street Journal, Amazon stated that the practice was actually common among retailers, and not just itself.
“News flash: retailers promote their own products and often don’t sell products of competitors,” said Amazon spokesman Drew Herdener in a written statement. Herdner then pointed out how Walmart refuses to sell Amazon brands such as Kindle, Fire TV and Echo.
The restrictions Amazon has put in place, however, do mean that products that they do allow from rival companies often don’t appear atop search results for those products.
According to tests done by the Wall Street Journal, searches for Roku products frequently displayed sponsored product advertisements from Roku competitors – not just Amazon’s – or Roku products offered by resellers.
Amazon’s actions could attract the attention of legislators who are already looking into the company’s business practices and its treatment of competing sellers on its site. In July, Bezos was made to testify to Congress about the tactics of Amazon’s private-label brands and the company’s business practices in general.
Meanwhile, the Federal Trade Commission, Department of Justice as well as European Union and Canadian regulators are also looking into the company’s business practices.
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