Why does Amazon have ads?

Why does Amazon put ads on Amazon.com?

• Doesn't that distract from the search and checkout process?

• Answer:

  Multiple reasons: Comprehensiveness of their search results. If Amazon wants A9 (their on-site search) to become the Google of retail, they need to offer more than just what's on Amazon. By incorporating marketplace sellers and advertisers they increase the comprehensiveness of their results. So that's why the advertisers are embedded directly in the results. And since the ads are feed into the results just like Amazon's own products, they are relevant to the users search (and so don't violate Amazon's commitment to user experience). Revenue. And ads aren't just revenue, but extremely high margin revenue. Unlike products, ads don't have cost of goods, carrying costs, fulfillment costs, customer service costs, etc. So $1 of ad sales is probably worth $5 or even $10 in product sales. WSJ quoted Amazon's ad program as on track to hitting $500million/year. More recently Business Insider said it was $1 billion. Data. If Amazon sees an ad getting a lot of clicks, where applicable they can take action. So if they see some product they don't carry getting a lot of traction, they can alert their merchandising team. Also they can incorporate info on the ads people click on with what they know about their purchase history to get a better consumer profile. And so on.