Does Amazon Do Questionable Stuff? Sponsored Listings? Hmmm.

January 4, 2024

green-dino_thumb_thumb_thumbThis essay is the work of a dumb dinobaby. No smart software required.

Amazon, eBay, other selling platforms allow vendors to buy sponsored ads or listings. Sponsored ads or listings promote products and services to the top of search results. It’s similar to how Google sells ads. Unfortunately Google’s search results are polluted with more sponsored ads than organic results. Sponsored ads might not be a wise investment. Pluralistic explains that sponsored ads are really a huge waste of money: “Sponsored Listings Are A Ripoff For Sellers.”

Amazon relies on a payola sponsored ad system, where sellers bid to be the top-ranked in listings even if their products don’t apply to a search query. Payola systems are illegal but Amazon makes $31 billion annually from its system. The problem is that the $31 billion is taken from Amazon sellers who pay it in fees for the privilege to sell on the platform. Sellers then recoup that money from consumers and prices are raised across all the markets. Amazon controls pricing on the Internet.

Another huge part of a seller’s budget is for Amazon advertising. If sellers don’t buy ads in searches that correspond to their products, they’re kicked off the first page. The Amazon payola system only benefits the company and sellers who pay into the payola. Three business-school researchers Vibhanshu Abhishek, Jiaqi Shi and Mingyu Joo studied the harmful effects of payolas:

“After doing a lot of impressive quantitative work, the authors conclude that for good sellers, showing up as a sponsored listing makes buyers trust their products less than if they floated to the top of the results "organically." This means that buying an ad makes your product less attractive than not buying an ad. The exception is sellers who have bad products – products that wouldn’t rise to the top of the results on their own merits. The study finds that if you buy your mediocre product’s way to the top of the results, buyers trust it more than they would if they found it buried deep on page eleventy-million, to which its poor reviews, quality or price would normally banish it. But of course, if you’re one of those good sellers, you can’t simply opt not to buy an ad, even though seeing it with the little "AD" marker in the thumbnail makes your product less attractive to shoppers. If you don’t pay the danegeld, your product will be pushed down by the inferior products whose sellers are only too happy to pay ransom.”

It’s getting harder to compete and make a living on online selling platforms. It would be great if Amazon sided with the indy sellers and quit the payola system. That will never happen.

Whitney Grace, January 4, 2024


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