Advertising on the worldwide web has been around nearly as long as the web itself. Being forced to view advertising is part of the price we all pay for the web. The other part is data about the sites we visit and what we buy and what we search for.
Amazon.com Inc. (NASDAQ: AMZN) was awarded a patent in October for an advertising product that it called “content-based price reductions and incentives.” The company filed the patent application in July of 2009.
Simply put, Amazon has come up with a way to give its customers the option to view advertising in exchange for a price discount or some other benefit. For perhaps the first time, customers will be able to set a value on their time — pay full price and get finished more quickly or spend a minute or two watching an ad in exchange for a lower price.
This could unleash a veritable flood of new revenue for the e-commerce giant. The internet’s advertising duopoly of Alphabet Inc.’s (NASDAQ: GOOGL) and Facebook Inc. (NASDAQ: FB) snagged $79 billion and $27 billion, respectively, in 2016 ad sales. Amazon does not break out ad sales, but by one estimate 2016 ad sales totaled a paltry $500 million, rising to $1.5 billion in 2017 and to more than $2.4 billion by 2019. That’s not much more than peanuts.
But Amazon could reap far larger rewards with its patented system for two reasons: first, ads that reward viewers by giving them ad-free (called “payoff” ads) browsing are more effective at generating brand recall, and second, viewers are more willing to put up with an ad if they get rewarded for it. What people hate is being forced to watch pre-roll and pop-up ads and autoplay ads and the list goes on.
Amazon is also currently testing a new ad program for its marketplace partners that would allow them to post how-to and product review videos before making a purchase. Google’s YouTube must have tens of thousands of how-to videos on everything from baking a souffle to fixing your old VW bus.
By letting its partners post how-to videos, Amazon improves its chances of keeping shoppers on its site for longer rather than letting them escape to YouTube. That means that viewers get to see more ads for which Amazon gets paid and, if these ads are served with a cash reward in the form of a lower price, Amazon and its partners stand a better chance of making a sale.
Amazon’s patent application is available at the U.S. Patent and Trademark Office website.
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