Inside Amazon’s Retail Advertising Service: The Price of Privacy

Amazon’s ad business continues to break records. In the third quarter of 2024 alone, Amazon reported a staggering $14.3 billion in ad revenue, marking a 19% year-over-year increase. Once considered a sideline to its e-commerce and cloud empire, advertising has emerged as a critical revenue engine for the retail giant, offering brands unparalleled access to its ecosystem of first-party data .

Now, with the launch of the Retail Advertising Service, Amazon is poised to further expand its dominance, offering retailers the ability to precisely target consumers at every stage of their shopping journey. But behind this growth lies a critical question: Are consumers really giving informed consent to how their data is being used?

In an age where data is the new oil, consent has become murky, often reduced to a transitory checkbox at the end of an endless privacy policy. Amazon’s advertising service highlights the need to rethink how consent is obtained, understood and respected in retail media. This is not just about compliance – ethics, trust and the evolving relationship between businesses and their customers.

As Amazon continues its meteoric rise in digital advertising, its new retail ad service promises to be a game changer for brands and retailers. Providing a powerful platform to precisely target consumers, the service leverages Amazon’s unparalleled access to data from the world’s shopping habits, voice interactions and even physical behaviors. But behind its promise lies a fundamental question: Do consumers give informed consent for their data to be used in such a pervasive and interconnected ecosystem?

Amazon: An Illusion of Consent

Engaging with Amazon feels simple and intuitive to most consumers: browse, buy, repeat. However, the consent they give to share their data is anything but straightforward. When someone uses Alexa, shops on Amazon, or even streams Prime Video, they unknowingly contribute to a large ecosystem of data that drives advertising algorithms.

The problem? Most consumers do not fully understand the extent of their participation. A 2023 Pew Research study found that 79% of Americans are concerned about how companies use their data, but only 21% feel they have any control over it. In Amazon’s case, consent is often buried in laws and few have the time — or expertise — to analyze.

Does clicking “Accept” on Amazon’s terms of service constitute meaningful consent when most people don’t know what they’re agreeing to? This gap between perceived and actual consent creates fertile ground for mistrust and pushback.

Amazon’s Data Goldmine

Amazon’s retail advertising service thrives on the company’s first-party data, which includes detailed details about purchase histories, search behavior, wish lists and even real-world actions captured through devices like Ring and Echo. With this data, advertisers can precisely target consumers at every stage of the purchase journey.

While this is a benefit to marketers, it raises important ethical questions. Are consumers aware that their seemingly mundane actions—asking Alexa for a recipe or buying detergent—are being monetized to boost advertising revenue? The scope of Amazon’s data collection is unparalleled, yet the average user remains largely in the dark about how their information feeds the platform.

Dustin Raney, Identity Evangelist and Senior Director, Industry Strategy at Acxiom, a global leader in data-driven marketing and customer intelligence, underscores the importance of managing first-party data responsibly: “Brands are now forced to adapt to these new and ever-changing customer privacy regulations.They must take control of the relationship by focusing on optimizing, resolving and enriching their party data first.”

Amazon’s ability to navigate these challenges effectively may determine whether the Retail Advertising Service inspires trust or provokes consumer backlash.

Sensitive Data: Is Amazon Crossing the Line?

While Amazon’s data collection powers its retail advertising service with unmatched accuracy, it also raises questions about the collection and potential use of deeply personal information. Consumers may agree that their shopping habits—such as detergent purchases or streaming preferences—are being used to personalize ads. But what about the more sensitive knowledge inadvertently captured through Amazon’s ecosystem?

For example, consider Alexa’s voice interactions. While Alexa is designed to respond to commands, its ability to constantly listen raises concerns about inadvertent data capture. Imagine a random question like, “Alexa, where is the nearest church?” or “What are the symptoms of diabetes?” being collected as part of the customer profile. While seemingly harmless, such interactions can reveal personal knowledge such as political or religious leanings, health concerns, or other intimate details.

Similarly, product purchases such as sensitive health care items—from over-the-counter medications to home testing kits—can be used to ascertain medical conditions or life circumstances. While Amazon has strict policies around data security, consumers may wonder: How much of this data is fed into advertising algorithms, and could it be misinterpreted or even exposed in ways they didn’t anticipate?

The challenge lies in consumer awareness and control. Most people don’t realize how seemingly benign data points can come together to create a comprehensive and potentially invasive picture of their lives. This isn’t just a matter of legal compliance — it’s about whether Amazon can ensure that such sensitive data is used responsibly or, better yet, excluded from ad targeting altogether.

By proactively addressing these concerns and setting clearer boundaries for how sensitive data is collected and used, Amazon has an opportunity to foster trust and lead the industry in ethical data practices.

Regulatory challenges

The regulatory landscape around data privacy has tightened, with laws like GDPR in Europe and CCPA in California pushing companies to rethink how they handle consent. These regulations aim to give consumers more control over their data, but also leave room for interpretation.

While likely complying with these laws, Amazon’s approval approach may not be consistent with their underlying intent. Legal compliance alone does not guarantee ethical behavior. As governments around the world continue to crack down on shady data practices, Amazon faces a pivotal moment: Will it meet minimum requirements or set a higher standard for transparency and accountability?

Reimagining Consent

The future of retail media may depend on rethinking consent. Imagine an Amazon that not only enshrines its data practices in fine print, but actively invites users to engage with them.

For example:

• Real-time notifications: Inform users immediately – “This purchase will help personalize your ads.”
• Consent panel: These allow consumers to view, manage and revoke consent for specific types of data use in an intuitive interface.
• Data transparency reports: Provide regular updates that show how customer data is used and the value it creates for them.

These steps wouldn’t just protect consumers — they could give Amazon a competitive edge by boosting confidence in an industry increasingly scrutinized for its opacity.

The ethics of push

Amazon’s algorithms are designed to optimize ad performance, but this optimization raises ethical questions. By leveraging behavioral data, the system can nudge consumers toward purchases they might not have made otherwise. At what point does it cross the line from helpful to manipulative?

Consent should not be used as an excuse for targeting behavior that exploits consumer psychology. To lead the industry, Amazon must ensure that its pushes are empowering rather than exploitative, respecting both the letter and the spirit of consent.

Amazon: Consumer Pushback and Brand Trust

If Amazon fails to address these consent concerns, it risks losing the trust of its customers — a critical asset in an era of heightened privacy awareness. High-profile privacy blunders by companies like Facebook have shown that consumer sentiment can quickly turn toxic, damaging brands and bottom lines.

The stakes are high. As Amazon’s ad service grows, it could become a lightning rod for debates about consumer rights, data ownership and the ethical use of technology. Conversely, by prioritizing consent and transparency, Amazon could set a new standard for trust in retail media.

The future of retail media networks

Amazon’s retail advertising service is more than just a tool for brands—it’s a window into the future of consumer relationships in a data-driven world. Consent must evolve from a passive exercise to an active and meaningful exchange between businesses and their customers. If Amazon can lead the charge, it won’t just dominate retail media; will redefine it, proving that profit and ethics are not mutually exclusive. The question is, will it seize this opportunity – or gamble with consumer confidence?