A recent Wall Street Journal story alleged Amazon engineers changed the site’s algorithm after pressure from executives to “more prominently feature listings that are profitable,” which could, in turn, favor its own brands.
In a statement sent to multiple news outlets, Amazon said the story is inaccurate and denied the criteria used to rank search results have changed to include profitability.
But that’s not to say Amazon is blind to profit potential.
“We feature the products customers will want, regardless of whether they are our own brands or products offered by our selling partners,” according to the company’s statement. “As any store would do, we consider the profitability of the products we list and feature on the site, but it is just one metric and not in any way a key driver of what we show customers.”
Search and Amazon experts alike—and even some of Amazon’s third-party sellers—were rather blasé about the development, telling Adweek it makes sense for the ecommerce giant to give its own brands an advantage in search and to seek profitability. Plus, boosting profitable products doesn’t necessarily mean Amazon is not also displaying the most relevant and/or best-selling items it carries for given queries, they said.
“I’m not a legal expert, but I think this may come down to intent,” said Larry Pluimer, CEO of Amazon agency Indigitous. “Did Amazon do this to promote its private label products, or did they do it to improve the customer experience, and their private label products just happened to score well in that scenario?”
It’s hard to tell from the outside. Amazon did not comment. And so Pluimer raised another question: “If Amazon is giving preferential treatment to its own products, is that Amazon’s right to do so?”
Many say yes.
“A company doing something to boost its profits. Shocking? Hardly. It’s called business,” said Danny Goodwin, executive editor of the publication Search Engine Journal. “If customers are happy and they’re profiting, how is this a bad thing? Should they provide poor results that result in people not buying? What kind of business model is that?”
Mike Grehan, CMO of search agency Acronym, agreed, calling it “kind of crazy” to accuse a company that made its fortune predicting what people want to buy of pushing its own brands.
“Imagine a company wanting to sell its own products on its own website,” Grehan said. “Outrageous!”
Both Goodwin and Grehan likened it to a supermarket displaying its own private label products next to competing goods from big brands.
“The goal of any business is to make profit,” added Bryan Eisenberg, co-founder of the agency BuyerLegends and co-author of the book Be Like Amazon. “Do you know why gum and batteries are all by the checkout in grocery stores? They are high-profit items.”
What’s more, Amazon uses profitability as a factor in other decisions, including advertising.
“They may decline to run an ad from a vendor if the item does not meet Amazon’s profitability goals, for example,” Pluimer said.
Is Amazon giving itself an unfair advantage?
Even Amazon’s third-party sellers weren’t particularly surprised by the report.
Jonathan Weber, an Amazon seller focused on outdoor equipment and office supplies, said he has seen Amazon give its own products special sponsored-type listings alongside organic results, which is a form of favoritism because those promotional elements are not available to third-party brands.
But he also said it’s understandable since “they are the owner of the platform and they are distinguishing these featured products from the organic listings on the page.”
Here’s where things start to get murky.
John Frigo, a seller with three private labels on Amazon, wasn’t shocked the company that controls the algorithm is showing its own products before third-party products either.
“The same thing goes with Amazon using third-party sellers’ data. You have this information, which is a goldmine, and you’re really not going to look at it or use it?” Frigo asked. “I think it’s naive to think Amazon is going to be a good actor and be ethical. Amazon has a duty to shareholders to make as much money as possible, and that overrides anything and everything else.”
Frigo’s comments follow reports the Federal Trade Commission is interviewing third-party sellers like himself to determine whether Amazon is giving itself an unfair market advantage. The European Commission confirmed a similar investigation earlier this year into Amazon’s dual—and perhaps conflicting—roles as a retailer of products and a marketplace where merchants sell competing goods.
That, in part, is what distinguishes search on Amazon from search on Google.
“In this sense, Google’s more agnostic to which retailers it shows,” added Mark Irvine, director of strategic partnerships at search marketing company WordStream. “Whoever wins that ad auction is featured on the [search engine results page].”
That didn’t stop Texas Attorney General Ken Paxton from leading an investigation—which includes all 50 attorneys general—into Google’s “overarching control of online advertising markets and search traffic that may have led to anticompetitive behavior that harms consumers.”
While past investigations into Google have resulted in antitrust actions, Paxton said none have fully addressed the source of Google’s market power and its ability to protect and maintain said power.
“There is nothing wrong with a business becoming the biggest game in town if it does so through free market competition, but we have seen evidence that Google’s business practices may have undermined consumer choice, stifled innovation, violated users’ privacy, and put Google in control of the flow and dissemination of online information,” Paxton said in a statement. “We intend to closely follow the facts we discover in this case and proceed as necessary.”
That should make Amazon pause.
“I think the precedent’s been set, particularly in the EU,” Irvine added. “You have to assume that similar regulations will be passed on to Amazon.”