Amazon wants to sell its advertising to retailers. Is it a Trojan Horse?

Amazon’s latest announcement about retail media — offering its ad technology to other retailers — might seem like asking competitors to invite the fox to the chicken coop. With Amazon already controlling nearly 75% of retail media spending according to eMarketer, and a history of retailers shunning Amazon’s AWS cloud hosting technology due to competitive concerns, the proposition seems bold.

However, the retail giant can still find willing partners, especially among medium-sized and smaller retailers looking to jump-start their retail media aspirations.

The case of the bull

Despite the apparent audacity of Amazon’s proposal, the retail giant may yet find willing partners, particularly among mid-sized and smaller retailers looking to jump-start their retail media aspirations. The potential benefits of the “Amazon Retail Advertising Service” are twofold.

First, access to Amazon’s massive pool of advertisers – iHerb, one of the beta partners, already shares 1,200 advertisers with Amazon. “This innovative solution and proven technology allow us to deliver more relevant and personalized advertising to our shoppers,” said Neil Folgate, SVP of Global Marketing at iHerb.

Second, the value proposition includes a stack of battle-tested technology that has powered Amazon’s growth into a $50 billion advertising business.

Amazon launched self-serve sponsored product advertising in 2014 and quickly built a large ad tech ecosystem that runs from the bottom of the funnel, retargeting to complex connected TV ad buys. Amazon’s technological capabilities are unmatched among other retailers. Access to these advanced tools and knowledge can level the playing field for other vendors who would otherwise find these capabilities out of reach.

Amazon also promises access to its extensive portfolio of advertisers, which brought in $14 billion in revenue for the company in the third quarter of 2024. That means retailers have a head start among advertisers already eager to spent money.

For skeptics who see this as a Trojan horse strategy, there is a successful precedent with another major e-commerce player: Instacart. Instacart’s Carrot advertising platform has shown how a potential competitor can become a valuable infrastructure partner for retailers if the value proposition is strong enough. Thrive Market, The Fresh Market and Schnucks are grocery retailers that have partnered with Carrot Ads.

The data dilemmaHowever, the data concerns are huge. “Amazon isn’t just selling AdTech – it’s selling dominance in the retail media ecosystem,” said Mikael Brakker, Europe Area E-Commerce Director of L’Oréal Luxe in a LinkedIn post. “You can be sure they’re going to weaponize the data,” he warns.

Many retailers including Walmart, Target and Kroger already avoid using AWS to host their websites. Walmart has been the most vocal about this choice driven by competitive concerns, even asking its retailers to stop using the technology. Home Depot has generally kept its customer-facing infrastructure off of AWS.

This partnership could be considered even more intimate, though Amazon says it will keep retailers’ data separate from Amazon’s data through the use of clean rooms.

A question of scale

Opportunity can end up being divided along size lines.

“The big question for vendors, do they want to rely on technology and support one of their biggest competitors?” says Roger Dunn, Global Head of Retail Media at Diageo. “The bigger players are unlikely to go there, but for the smaller players, this could just be the stacking game that helps them unlock a meaningful ad business, without the need for a huge investment in team and technology .”

“Established retailers will not approve of this,” said the Head of Retail Media at a leading category retailer on LinkedIn.

Needle breakage

Amazon is trying to thread a delicate needle. The platform promises data sharing through AWS Clean Rooms, producing only aggregated, anonymous reports. And Amazon’s sophistication in retail media technology is unmatched. Drew Habeck, SVP of Media at Omnicom’s agency Flywheel, highlights the benefits: “Consistent measurement, reporting and purchase data across various retail platforms is incredibly detailed for campaign performance and optimization.”

The strategy reflects Google’s democratization of programmatic advertising. By removing barriers around cost, time and talent, Amazon can significantly expand the retail media pie.

For retailers considering the partnership, the calculation is complex. The immediate benefits—sophisticated ad technology, access to major advertisers, and proven measurement capabilities—must be weighed against long-term strategic concerns about data control, competitive positioning, and ultimately giving a leg up to your biggest competitor. industry.

The move also poses an existential challenge to retail media tech vendors like Criteo and Epsilon, which have built businesses helping retailers build their own ad platforms — as well as a new breed of providers like Koddi, Pentaleap and Topsort. Amazon’s entry into this space, with its massive scale and established relationships with advertisers, could reshape the competitive landscape for ad tech providers.

Success will likely depend on Amazon’s ability to maintain clear boundaries and demonstrate value while respecting retailer independence. Amazon’s bold bet could either accelerate the democratization of retail media or cement its dominance in another digital arena. For now, the industry watches with a mixture of interest and trepidation as the strategy unfolds.