Why Amazon is Blocking Advertising for Unprofitable Products
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Why Amazon is Blocking Advertising for Unprofitable Products

Why Amazon is Blocking Advertising for Unprofitable Products

E-commerce giant Amazon is aggressively blocking money-losing products from advertising on its site in an attempt to increase profitability.

In its most recent quarter, Amazon posted $3 billion in net income, the highest in company history, while profit for the full year more than tripled to $10 billion. Last year, the company’s ad revenue more than doubled to $10.1 billion, and it’s expected to grow another 50 percent this year, according to eMarketer. In lieu of its goal, Amazon is exerting greater control over its platform, pressuring brands to lower their prices if they want to advertise.

Over the last couple of months, Amazon has been telling more vendors and brand owners who sell their goods wholesale that if Amazon can’t sell those products to consumers at a profit, it won’t let them pay to promote the items. For example, if a $5 product costs Amazon just about that amount to store, pack and ship, the product’ won’t be allowed to advertise it.

Amazon is trying to be much more profitable than they were in the past,” said Joe Hansen, CEO of Buy Box Experts, a firm that helps companies sell on Amazon. “But this policy shows there’s bias in Amazon’s ad service, even though it says it’s an open advertising platform.”

Here’s what Amazon is telling them, according to an email that was viewed by CNBC:

“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.” The email goes on to say that the brand must “lower the product’s cost” to Amazon in order to become eligible for advertising again.”

An Amazon spokesperson told CNBC that the company is doing what retailers have done for decades.

“Like all retailers, Amazon decides which products to market and promote in our stores based on a variety of factors, such as relevancy, availability, profitability and other factors,” the spokesperson said.

Internally, Amazon calls these products “CRaP”, which stands for “Can’t Realize a Profit.” Typically, they are items that sell for less than $25 but could go up to $2,000 if they’re bulky and expensive to store and ship.

Megha Shah
Megha Shah
A dreamer, traveler, aspiring entrepreneur and a bookworm beyond repair, Megha Shah is extremely fond of writing and has been doing so since she was a child. Apart from being a part-time writer, Megha is currently in college, pursuing B. Com. (Hons). Megha is an ardent follower of ‘Hardship, Hustle and Heart’ and firmly believes in the power of hard work and destiny!