POV: Amazon Looks to Buy Sizmek

Background:

Bloomberg reports that Amazon is finalising a deal to buy ad-serving tech company Sizmek.

Details and Implications:  

Sizmek filed for bankruptcy in March, stating in its filing that its assets were worth between $100m and $500m. It proceeded to sell its demand-side platform (DSP) and data management platform (DMP) business to Zeta Global for up to $36 million, meaning any deal with Amazon is likely to be less than the top end number.

It is no secret that Amazon is looking to get serious about taking part of the digital advertising business. Currently, Google dominates market share (31.1% of the global digital ad market) with $102.4bn of net digital ad revenue (including YouTube ad revenue).

Facebook (with 20.2% of the global digital ad market) follows close behind with $67.2bn (including Instagram ad revenues).

In comparison, Amazon’s $9.1bn net digital ad revenue is small. However, an acquisition of Sizmek would give Amazon the ad serving capability it needs to encourage advertisers and brands to shift their online ad budgets from Google and Facebook over to Amazon - especially if that ad server is power by the Amazon ID and the wealth of first party data that Amazon holds on its customers shopping and viewing habits.

The world of commerce is continuing to merge with the world of media, collapsing the traditional sales funnel and brining the point of purchase for consumers all the way up to the point they see the ad. Amazon has admitted itself that its advertising services are not as easy to access as they could be – the acquisition of an ad server that can be integrated with its huge pool of consumer data could go a. very long way to solving that issue.

The deal is also reminiscent of Facebook’s purchase of Atlas Advertiser Suite from Microsoft in 2013. At that time, Atlas was seen as a less than perfect technology and the sale price was less than $100m. However, Facebook successfully re-engineered Atlas to run using the Facebook ID and has never looked back. Initially using it as an ad server for the platform and its wider ad network and then gradually changing its purpose to sit at the heart of the platform’s measurement suit to prove the value of advertising on the platform.

At time of writing the deal hasn’t been finalized and both parties have denied to comment.

Summary:

Though Google currently still dominates the digital advertising industry, Amazon is keen to muscle in on the action. Due to Amazon’s vast consumer reach, it has become a great gateway for marketers targeting shoppers and it holds an enormous trove of first party consumer data. As advertisers and brands shift their attention towards the convergence of commerce and media we will see media platforms increasingly trying to embed commerce into their services and commerce platforms adding more media and advertising services.

Further Reading:
Bloomberg | AdExchanger | eMarketer