Amazon just made a big bet to beat Google in advertising tech

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Amazon has acquired the ad server and creative tools from bankrupt ad-tech firm Sizmek, giving it a new tool to compete head-on with Google.
Amazon’s been steadily building out a programmatic ad business to cater to big brands, and the acquisition could help it load up on Sizmek’s automotive and luxury clients.
Advertisers would like an alternative outside of Google for ad serving, but some sources pointed out that it’s a hard market to crack — citing Facebook’s shut down of Atlas in 2016.
Sizmek’s ad server has also been losing steam. The business generated $80 million in revenue in 2018, down from $100 million in 2017, according to the CEO of an ad-tech firm who has seen Sizmek’s financials.

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Amazon is coming after Google’s ad business with its acquisition from bankrupt ad-tech firm Sizmek.

The e-commerce giant agreed to acquire Sizmek’s ad server, which is technology that marketers use to place and measure ads across publishers’ websites. In a blog post published May 31, Amazon also said that it had agreed to acquire Sizmek’s Dynamic Creative Optimization business, a tool that lets brands plan one campaign and target ads to different audiences.

"Sizmek and Amazon Advertising have many mutual customers, so we know how valued these proven solutions are to their customer base," Amazon wrote in the blog post. "Sizmek has been searching for a buyer for Sizmek Ad Server and Sizmek DCO, and we are both committed to continuing serving their customers at the high standards they’ve come to expect."

Under the pending deal, Amazon said it planned to keep its Sizmek acquisitions seperate from its advertising business for the time being. It’s not clear if the ad-tech assets will work with Amazon’s advertising group.

Amazon declined to comment on the price of the acquisition but said that it would be disclosed in public records.

Sizmek filed for bankruptcy protection in March and has since been selling off pieces of its business to advertising and marketing firms. Last month, Zeta Global acquired Sizmek’s demand-side platform and data-management platform for about $40 million.

Bloomberg first reported that Amazon was close to purchasing the Sizmek assets.

Amazon is gunning for more ad dollars

Ad-tech executives, agencies, and consultants were split on whether Amazon’s pending acquisition would help the e-commerce giant expand its ad business.

Several execs said that the move could kickstart Amazon’s programmatic business globally and bring in Sizmek advertisers from categories like automotive and luxury marketers that don’t sell items on Amazon. Others questioned why Amazon would acquire Sizmek’s ad server instead of building similar and brand-new technology in-house.

Competing with Google on ad serving has been a challenge for ad-tech companies in the past. Facebook, for example, purchased Atlas for a reported $50 to $100 million in 2013 to compete with Google before shutting it down and roping it into the company’s measurement department in 2016.

"There are many in our industry rooting for a worthy adversary to Google on buy-side ad serving," said Matt Prohaska, CEO and principal of Prohaska Consulting.

Amazon is about to get a lot more involved in programmatic advertising

Sizmek’s ad server is a direct competitor to Google Marketing Platform, Google’s technology that was formerly known as DoubleClick. Google Marketing Platform is the dominant ad server that advertisers use to run display and mobile ads.

In OTT advertising, Google is in tight competition with Comcast’s FreeWheel to control ad serving. Buying Sizmek’s ad server could soup up Amazon’s ad tech and diversify its revenue from the bulk of advertising that is sold within its site and app. To make a dent in Google and Facebook’s ad business, Amazon has been rolling out ad formats like video and programmatic advertising to win bigger brand budgets.

"If Amazon wants to keep increasing their ad revenue and stealing market share from Google, they have two options: Increase the price of buying on-Amazon ad space to a point where it becomes cost prohibitive to advertise there, or expand their off-Amazon network and capabilities," said Ryan Burgess, director of Amazon at Blue Wheel Media, an agency that helps brands run Amazon campaigns. "We’re seeing them develop new tools and features for off-site display at a much faster rate than on Amazon."

David Jones, founder and CEO of "brand tech" company You & Mr Jones, said that Amazon stands a good chance of taking on Google because of its existing and rapidly growing programmatic ad business. According to Pivotal Research, Amazon is on track to make $38 billion in advertising in 2023, up from $10 billion in 2018.

"It’s one of the very few big ad serving-businesses around [and] Amazon’s growth in the advertising space is just unbelievable," Jones said.

Amazon’s move could give its ad business a quick burst of growth

One CEO of an ad-tech firm who looked at buying Sizmek’s ad server noted that the company’s business has been slipping. In 2018, Sizmek’s ad server generated $80 million in revenue, down 20% from $100 million in 2017, according to the exec who has seen Sizmek’s financials.

Sizmek declined to comment on its financials. When the company filed its bankruptcy proceedings in March, Sizmek valued its assets to be worth $100 to $500 million, a fraction of its once high value.

Michael Cassidy, CEO of e-commerce agency BVAccel and former CEO of ad-tech firm Undertone, suggested that Amazon could use Sizmek’s ad server to onboard advertisers into its advertising business before shutting down the technology.

"This is a buyer’s market, not a seller’s market," he said. "It feels like Amazon is going after this big commerce mindset — there’s no reason why Amazon doesn’t get there and this tech is an enabler."

The acquisition could also help Amazon build out better closed-loop reporting tactics that measure if someone purchased something after they saw an ad for it. Facebook also tried to solve the same challenge with Atlas, but Amazon already provides parts of such data to its sellers already, said Hugo Loriot, managing director at ad-tech and data firm Fifty-Five. Advertisers have a harder time getting the same data but that could change with the Sizmek’s acquisition, he said.

"Brands and their agencies could run ads with any publisher or media channel and see the impact of their buys on Amazon," he said. "If you combine Amazon’s proprietary data and reporting with Sizmek’s technology pipes then it can theoretically work."

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