In addition to being a retail giant, a cloud leader and a grocery heavyweight, Amazon is rapidly ascending to the top of the advertising world as well, and that carries with it a new tightrope the tech giant will have to walk.
In a wide-ranging interview with Forbes’ Randall Lane, Amazon CEO Jeff Bezos discussed Amazon’s advertising business and how it handles customer data. Amazon CFO Brian Olsavsky called out the success of its advertising business in a call with investors, saying it is “now a multibillion-dollar business for us,” and Lane noted that the tech giant is on pace for $8 billion in ad revenue this year.
Amazon is in a unique position to challenge the online advertising duopoly of Facebook and Google because, as Lane writes, “Google might know what you’re interested in buying, Facebook might be able to deduce what you’d be inclined to buy, but Amazon knows what you’ve actually bought, or even whether you showed intent to buy.”
In the wake of the Facebook-Cambridge Analytica data breach scandal, customers are more protective of their data. Amazon, famous for its customer-obsessed nature, will have to walk the line with customer data as it builds its advertising business.
“It’s very valuable, and so you would never do anything to jeopardize it,” Bezos said of retaining customer trust. “It’s what allows you to expand the business.”
Bezos answered with a succinct “no” when asked if he had taken any lessons from Facebook, according to Lane. He also says he hasn’t thought of Amazon as a data company.
Bezos, who said he delegates pretty much all of Amazon’s day-to-day operations, does a lot of thinking about what Amazon is and what he wants it to be. Its unique combination of businesses makes it easy to quickly enter other industries, and it’s a near certainty that Bezos has plenty of ideas bubbling about which world to disrupt next.
Bezos said he “gets to work two or three years into the future,” and most of his leadership team has the same mindset.
“Friends congratulate me after a quarterly-earnings announcement and say, ‘Good job, great quarter,’ and I’ll say, ‘Thank you, but that quarter was baked three years ago,’” Bezos told Lane. “I’m working on a quarter that’ll happen in 2021 right now.”
Bezos gave a window into how where the company’s ideas come from and how they are approved. “Two-way doors,” which are small and incremental improvements, can be green-lighted by any number of executives and don’t necessarily have to be OK’d by Bezos. When it comes to Amazon’s biggest moves, the process is a little different, Lane writes.
But regarding the larger ideas and verticals — a.k.a. “one-way doors” — that change the direction of the company, Bezos prides himself on playing “chief slowdown officer.” He’s looking for three things. First, originality. “We have to have a differentiated idea. It can’t be a ‘me too’ offering,” he says. Second, scale. “We’re gifted with some very large businesses we’ve built over time, and we can’t afford to put our energies into something that if it works, it’s still going to be small.” And, finally, a Silicon Valley-worthy ROI. “Even at substantial scale, it has to have good returns on capital.”