Amazon Is Shutting Down Ads for Money-Losing Products
Amazon’s ad business is booming, but the e-commerce behemoth is reportedly cracking down on the promotion of certain products — not due to defects or counterfeit issues but because they’re not profitable for the company to sell.
According to a new report from CNBC, Amazon has tightened its restrictions on what items vendors can pay to push to the top of a page of search results. If something doesn’t meet the criteria, advertisers receive the following notice: “One or more of your products no longer qualifies for advertising because the sale of this product on Amazon.com currently results in a loss to Amazon.”
Related stories
Retail Intel: Red Wing Debuts First NYC Flagship + Other News
The Great Debate: Are Cashless Stores Discriminating?
Selena Gomez's Puma Collection Just Debuted on Amazon -- 5 Items to Buy Now
Inside Amazon, employees refer to these products as CRaP, meaning “Can’t Realize a Profit,” because the costs to store and ship the items generally outweigh any earnings from the sale. Bulky, inexpensive items are a particular target for the retailer, which in recent months has doubled down on efforts to improve its margins and profitability. Third-party merchants selling on the Amazon marketplace are still free to advertise money-losing products — after all, the sellers bear the costs themselves and shell out a 15 percent cut plus warehousing fees on top of any ad spend — but companies that sell their products on a wholesale basis could find themselves shut out.
While Google and Facebook still dominate the digital advertising landscape, Amazon’s share of the pie is growing: Last year, its ad revenue reached $4.61 billion, according to digital research firm eMarketer, a figure that’s expected to more than double in 2019. But unlike the current duopoly, Amazon doesn’t just act as an ad network — it also buys and sells product and competes with vendors through its private-label business, raising questions about the degree of control it wields, particularly as it continues to account for an ever-bigger share of consumer dollars.
Amazon had not responded for comment as of press time.
Sign up for FN's Newsletter. For the latest news, follow us on Facebook, Twitter, and Instagram.
