Amazon is gearing up for a successful holiday season, and this year, it’s unleashing the power of generative AI as its secret weapon. With a vast database of over 160 million Prime subscribers, Amazon is leveraging cutting-edge artificial intelligence (AI) to supercharge ad targeting and empower merchants to create promotions swiftly.
In addition to the familiar speed of delivery and enticing discounts typically associated with Black Friday and Cyber Monday, Amazon is banking on AI-driven targeted advertising to draw in more shoppers and advertisers to its platform.
Amazon’s CEO, Andy Jassy, underscored the pivotal role of machine learning in serving up more pertinent advertisements to shoppers. He noted that advertisers tend to favor ads with high visibility and strong performance when making budgetary decisions.
This week, Amazon made waves by revealing its utilization of generative AI to enhance product images for advertisers. This innovative tool generates background images based on product details, designed to enhance the visibility of third-party sellers’ products. While Amazon isn’t the pioneer in adopting AI for advertising, its vast scale is set to be a catalyst for the broader adoption of this strategy.
One of the standout merits of generative AI lies in its ability to personalize advertisements, presenting dozens, or even thousands, of variations tailored to individual users. This personalized approach is poised to deliver cost savings to advertisers, as highlighted by Andy Friedland, Chief Revenue Officer at Swiftly, a leading retail technology platform.
According to Brendan Witcher, a principal analyst at Forrester, Amazon’s generative AI ad tool is expected to be a pivotal force in attracting and retaining third-party sellers and brands that advertise on the Amazon platform.
Notably, other companies, such as Ascendly Marketing, have also embraced generative AI imaging tools. These tools combine images of public figures with products, creating whimsical and engaging campaigns. Such campaigns have led to significant boosts in social sharing and sales for Ascendly’s clients. Amazon aims to replicate this success with its own generative AI ad tools during the holiday season.
Analysts anticipate Amazon’s advertising business will rake in $14.2 billion during the holiday quarter, a significant increase from the $11.56 billion reported the previous year, based on LSEG estimates.
The use of AI-generated imagery may play a crucial role in convincing hesitant shoppers to make purchases by showcasing more relevant products. Amazon’s Prime membership, known for its annual cost of $139, is a powerful tool for enhancing advertising effectiveness by pinpointing shoppers with exceptional precision, resulting in increased purchase frequency.
With Amazon’s massive volume of web traffic, it is ideally positioned for success in the competitive realm of online advertising. Amazon has confidently forecasted holiday-quarter revenue between $160 billion and $167 billion, surpassing the $165.6 billion estimated by analysts. In the corresponding quarter last year, Amazon reported revenue of $149.2 billion.
Nevertheless, the widespread use of Amazon’s AI-driven advertising tools may pose challenges to smaller advertising agencies and freelancers specializing in graphic design. This could impact their market presence. Additionally, there is the potential issue of ads featuring similar images for different products, making it more challenging for sellers to differentiate their brands in a highly competitive advertising landscape.
