alt Hacker NewsThe Amazon tax
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I've slowly shifted all my consumer purchases from Amazon to local shops and other online platforms, including Etsy.
I'm now seriously contemplating deleting my Amazon account of 15 years in one whole swoop. The quality degradation is painfully apparent, and the value add of Amazon in my life has been steadily declining for a while.
I've also had terrible experiences with AWS, but that's a different story.
Amazon's only core product that they care about now is their stock price.
>If you’re searching for an air fryer, Amazon already knows quite a bit. They know the best-reviewed, least-returned, best-priced model. The only purpose of the ads is to get you to pick an air fryer that isn’t that one (or for the best air fryer, to keep you on track to buy the one you wanted in the first place).
What if I made a new air fryer that hasn't received a lot of reviews and costs a little more because of its quality? How would I break through, if not ads?
Amazon is almost completely unusable for search at this stage. I think perhaps 3/4 of the results are sponsored ads. Three in four. Trying to find a good deal on a product, even if you know precisely what you're looking for, is a real headache of trying to dodge the advertisement minefield.
It doesn't have to do with Amazon. It is just how ads work.
Of course when you buy a product that is heavily advertised you know that you are paying for it, Amazon or not. That's why, when I see an ad campaign for a product I may want, it is a signal for me to look elsewhere. Some competitor may use what would be ad budget towards offering lower prices or better quality.
As for Amazon, it is not cheap! It is convenient, fast delivery, easy returns and all that. But if you forego that convenience, there is usually a cheaper option: local shops, Chinese platforms, direct sales, etc...
> The highest-yielding ad my publisher has tested so far is the search “Seth Godin The Knot“
I think it would be interesting to see legal action here. I’m not a lawyer, but I feel like there should be at least three ways to go after this:
1. Trademark infringement. If Amazon is using someone’s search that is clearly searching for a specific product, possibly trademarked, it seems inappropriate for them to serve up an ad for a competitor at higher priority than the actual result.
2. Fraud. If I search for a product that Amazon sells and Amazon shows me an ad for a different product first and hides the product I searched for below the fold, they are effectively telling me that they don’t have the product I searched for and possibly that it doesn’t exist. It seems to me that this is deceiving me for commercial gain.
3. Fraud again. If I search for a specific book and Amazon shows me an ad for that book, I think they’re trying to trick me into clicking that ad so they get extra revenue even if I don’t intend to click an ad. (And they’ve defrauded the ad buyer too. Those clicks are bogus. Seth Godin should not be charged for a click when the clicker was searching for the book by a good approximation of its name!)
Someone should file the multi-hundred-billion-dollar class actions :)
When searching on Amazon I always change sort to Best Sellers. The default is Featured Items which shows ads at the top and throughout results. For some searches that have a small number of real results, the majority of the list will be ads. Sorting by Best Sellers eliminates all ads in the results.
This assumes that people only (or at least) mostly depend on Amazon's search results' ordering to decide which products to buy. This is not true, at least not for everyone. I, e.g., visit review websites like Wirecutter to decide. Something tells me I'm not the only one.
Amazon is a net-negative overall but I don't think this understanding is correct:
> The only purpose of the ads is to get you to pick an air fryer that isn’t that one (or for the best air fryer, to keep you on track to buy the one you wanted in the first place). The ads make the search worse.
This is only true in extremely simply scenarios. In reality, most of the time individual consumers may prefer something other than "the highest ranked item in this category." Maybe another company has a feature that increases cost but adds utility, maybe there's a brand you trust more that makes a slightly less popular version, etc.
The problems of parasitic advertising still exist. People still see ads for products they will like less than the top rated search, but it's wrong to imagine that Amazon actually knows what that person would like best. If matching people to products was that easy you'd have all kinds of 3rd party recommendation services making very specific recommendations to make money off affiliate links. Instead we have a million "top 10" sites that work about as well as picking the #1 seller in an amazon category: not that well.
> Amazon makes enough in search ad revenue to give every single one of their employees a $35,000 cash bonus and still have change left over.
There was study not too long ago that showed that 48% of Amazon's employees were paid so little that they were forced to depend on some form of public assistance to meet their basic needs. Not only would an extra 35k a year prevent amazon employees from needing foodstamps and housing assistance, but I'd be willing to bet that amazon would make back some of it in increased amazon purchases too. It'd be great if the government cracked down on corporations who use taxpayer money to subsidize their labor expenses
Imagine there's a best-selling toaster. Amazon can recommend it and many people will be happy buying it. Then, one day a new toaster comes out, and it might be even better than the old best-seller. How would it get sufficient traction to be recommended by the algorithm? To send a strong enough signal, it would probably need a level of sales that could only be achieved with some level of advertising.
Separately, I'd note that Amazon doesn't want high levels of returns (which it has to pay for in many cases), so they still try to herd people toward products that they will find acceptable. Might they not love them as much as some others? Perhaps, though this is a fine line to try to walk, and I'm not sure that Amazon is actually trying to walk it.
> If you’re searching for an air fryer, Amazon already knows quite a bit. They know the best-reviewed, least-returned, best-priced model. The only purpose of the ads is to get you to pick an air fryer that isn’t that one
At least ads give the sellers a chance to compete for eyeballs 'legitimately'. The same marketing budget will not just vaporize if there is no ad space. It will be spent on fake reviews and even fake customers.
People who hate ads don't realize buying ads is the least evil way to compete for customers' attention.
It's amazing how poor on-site search has gotten, while at the same time the capability to have better results and more relevancy has gone way up.
I normally use Google and/or DuckDuckGo to search YouTube and Amazon, because if I'm looking for a specific video/product, that one will be 3-4 pages in (maybe not even shown).
Brand name products are buried 3+ pages deep on Amazon, while the first 2-3 pages are always drop-shipped Chinese knockoffs now. The onsite search is almost entirely useless.
I'm in the UK, and I've found that pretty much anything I can get on Amazon I can also get at John Lewis. It's probably more expensive - I'm in the lucky situation that I'm not particularly price-sensitive - but I much prefer the feeling of buying from JL. Very occasionally I'll buy something from Amazon like photo paper or some small gizmo that's difficult to find elsewhere. The one kind of physical shop I really miss is the kind of place where you can buy one screw, nail or picture hook etc. I hate the number of 10-packs of things I get where I only need one. (Luckily I live in a block of flats where there's a good community, so often I get those for free just by asking on our Signal group!)
The new (to me) Amazon Haul storefront is (to me) hilarious. I was stunned when I first saw it: https://www.amazon.com/haul/store
I didn't dig very deep to compare prices, but it appears to compete with Aliexpress/Taobao/Temu, with a larger marketplace fee (presumably justified by the "Amazon" brand recognition and customer capture?). Even after the absolute mess that Amazon made with their "Ships via Amazon" and "Ships from third party" schemes, this feels like a new low.
Paired with the article, it seems to me like the natural conclusion is that the company wants to move away from distribution and towards pure rent-seeking, in the most blatant ways possible, trying to squeeze as much cash as possible from their name while it has any value.
> The only purpose of the ads is to get you to pick an air fryer that isn’t that one (or for the best air fryer, to keep you on track to buy the one you wanted in the first place). The ads make the search worse.
"The best" is not a static product. If Amazon had no way for vendors to showcase their product, the best would be a stale product that accumulated decades of reviews. Maybe it's still the best , maybe not. But there is value to show some noise in the search long term.
Another way to look at it is through the vail of ignorance. Suppose you're a manufacturer of air fryers, but don't know where you stand in terms of how competitive or popular your product is. Would you want to live in a world in which you CAN'T bump your placement? Sure if you're the top 3 manufacturer, maybe you would prefer not to pay the tax. But if you're not, you'd much rather prefer the system in which you can.
> They know the best-reviewed, least-returned, best-priced model
That's assuming two things -- user desires and valuation models are identical (they're not, even within a single product view)
and that the state of products is static -- Once a product is best there cannot be a new best in the future. You have to have buyers try new products, some of them disappointed, to plot the shape of what is best or worst. Charging companies a fee means they have to be really sure/serious that what they have to offer is market satisfying (else they're wasting their money).
What we really need is for consumers to stop being so short term thinking and buying the cheapest item (on BNPL no less) and for Amazon to be held accountable for how they penalize people who legitimately compete with them (imo an anti-trust issue).
I've tried to replace Amazon with other vendors where possible. You can get partway there, but half the time, my orders get delivered from an Amazon warehouse anyway. Smaller vendors have basically surrendered logistics to Amazon entirely. At least I'm not giving Amazon ad revenue if I don't order directly through them!
This is the virtual equivalent of manufacturers paying for premium floor/shelf space in a brick and mortar store. The way to avoid it is to ignore the sponsored results and do some actual browsing - just like comparison shopping in a physical store.
Amazon search has been terrible for as long as I can remember. Not to disregard the scourge of ads that has infested the results but I've been frustrated with Amazon search for almost 2 decades.
Oh sure, their search gives you the impression you can filter/sort but due to zero policing anyone can say whatever they want about their product and I have the feeling Amazon just sucks at this on top of the seller malice.
Just try to filter down to the dimensions you need, the connector you are looking for, the material you'd prefer and you'll be inundated with tons of items that share not resemblance to the filters you entered.
I only want X brand, here I hope you want to see results from Z, W, Q brands as well!
I only want items under 2ft wide, here are 4ft, 1ft, 6ft options!
I want only <1' cables, here are 12ft cables.
It's all a miserable experience. Often I skip the filters because if they are so bad at keeping out the trash then I worry I'll also lose legit options because I have zero trust in Amazon's ability to accurately filter.
I won't pretend running Amazon is easy but I'm constantly in shock at how absolutely terrible Amazon's website is to use. The number of UIs that are clearly optimized around data retrieval optimization instead of serving the customer is insane.
This is simply, a monopoly. Whatever mechanism they came up with to squeeze the final dollars out of the system, such a system would exist because they can.
Really Amazon just has to overhaul their ratings system.
That ads are fine, it's not difficult to see what is labeled "sponsored".
What isn't fine is the hardcore gamification of reviews.
If reviews are fixed and you want to pay to advertise your 2-star hand mixer? Sure, but you are probably just paying to show off that you suck.
But this is how ads work? The entire concept of programtic ads is based on bidding for the highest leverage time and placement with $$.. So even you have the best product and your competitor outbids you, they get seen more and most likely get bought more?
And even if you go into a normal retail shop with a product in mind, all the available options showcased can "distort" your actual intent. Because that's what the shop is designed to do: to showcase, and even in that showcase, some products are placed/showcased so they catch your attention.
I doubt anyone chooses to create shoddy products just so they have more money to market them..
Only very tangentially related of course, but for all of that money going into search/ads/targeting, etc., searching 'shirt without stripes' on amazon today still returns shirts with stripes.
Per the classic https://github.com/elsamuko/Shirt-without-Stripes
I live in Italy, Amazon opened its Italian branch about 15 years ago. Initially it had a smaller catalog of products, with products sold almost entirely by Amazon. They were delivering packages in 3 days and the price was almost always much better than any other online or physical shop.
Over the years they largely improved the delivery time. Now if I am ordering a package before 4PM there is a high chance I will get it the next day in the morning. Prices however became higher and higher, at the point that for many products Amazon is not that convenient anymore: if you need home appliance (TV, dishwasher etc) other online or physical shops are now significantly cheaper. If you look sport equipment (e.g. climbing, mountain bike, hiking) the specialized shops are usually cheaper as long as you are OK to wait for longer delivery time and maybe combine 2 or more products to reduce the shipping costs.
I still find Amazon convenient during prime days and black Friday, and because of the large catalog with many alternatives and sometimes useful reviews (need a new shower head, a new mouse, a hole puncher, a tire for the bicycle...) but prices are not as good as they used to be. But if you need something in a hurry, the fact that you can order today and get it tomorrow is a big plus.
This reminds me of SABRE preferring American Airlines flights see https://en.wikipedia.org/wiki/Sabre_(travel_reservation_syst.... Back in 1984 this "Preferential display" was considered illegal by the US government. How times have changed....
In Europe, it led to the creation of the competing Amadeus system which did not keep display preferences and now dominates the market.
"If you’re searching for an air fryer, Amazon already knows quite a bit. They know the best-reviewed, least-returned, best-priced model. The only purpose of the ads is to get you to pick an air fryer that isn’t that one (or for the best air fryer, to keep you on track to buy the one you wanted in the first place)"
I don't get this part. Aren't those things unrelated? The aim of ads is to convince to buy regardless of the quality and other data points.
Google has entered the chat, and also eBay and every aggregator site on the web.
I think Ads improves discovery as well as is the most profitable part of amazon - https://s-1.vercel.app/posts/marketplaces-airbnb-future-foun...
I can't comment on the economics of it but amazon search is awful, and I think it's by design, not just by design though.
I was recently searching for some draw runners of a certain fixed size. Just cheap ones for some drawers I'm making for a workbench.
Found some cheap ones but not the correct length, but it made me realise something; If I sorted by price low to high the cheap ones did not show on any of the results pages. Amazon was purposefully showing me more expensive products.
I took some info from the cheap ones, searched for that, and the ones I wanted showed up in the search.
I wonder if anyone has trawled all of Amazon, and made a better search tool that doesn't try to rip anyone off?
Anyway, I am starting to find products cheaper outside of Amazon, including p&p.
"If you’re searching for an air fryer, Amazon already knows quite a bit. They know the best-reviewed, least-returned, best-priced model. The only purpose of the ads is to get you to pick an air fryer that isn’t that one (or for the best air fryer, to keep you on track to buy the one you wanted in the first place). The ads make the search worse."
This is it.
Same reason why the top ad on Google when you search for a brand is for the brand itself -- "brand bidding" is a thing, and if you don't bid on ads for your own brand, a competitor will. If Google can do it why not Amazon!
I do not understand why sellers accept this practice. I'd assume it would run afoul of some trademark law but the distinct lack of lawsuits indicates that either the legal grounds are shaky... or the sellers themselves find some advantage in it.
Isn't it funny that marketers are usually the first people to complain about paying for marketing?
FWIW - I agree with the premise of the article, but I have to say - the reason these types of practices are acceptable in American culture is exactly because of prominent "marketing gurus".
Amazon is nearly worthless to find anything anymore. Same items repeated dozens to hundreds of times, with minor changes, but all pointing to the same item.
It's like GOogle when ads outweighed your search results. Amazon has become a garbage pit.
Haha, that's the classic thing with platforms that have demand aggregation. They extract a lot of stuff. DTC, Telehealth, all these things end up paying Meta and Google a large fraction of their revenue. Same with Stripe et al. The idea is to take a rake on all spending. It puts you in an unfathomably strong position. It's why Visa and Mastercard are such good businesses.
To get something in front of someone you need to do some work. These guys have the people so they charge you to show it to them. I'm realistically not going off Amazon. If you want to list the ebook on your website maybe I'll buy it there, but if you do a physical copy your 'tax' is going to Shopify. That's how it is.
As awful as Amazon has become, I still use it for the same reason I started using it many years ago: books.
It's the one place I can find all the books my kids need for school. You search with an ISBN and always find exactly what you want.
Other things I buy elsewhere.
This is by far the most annoying thing about Amazon to me. They clearly are doing a disservice to their consumer with this. Many times I go straight to google to search for Amazon products, which leads to better results
Similarly, this is also why Google stopped enforcing trademarks years ago. It allows more people to bid on terms, increases competition, increases CPCs & of course pads their bottom line.
The income tax in UK has this quirk: once you fall near the top tax bracket, you retrospectively lose all tax-free allowances you could have availed, had you not fallen in the top tax bracket.
Likewise, once corporations blow past a revenue cap, they shouldn't be eligible for lower rate of corporate tax. If the US is any cautionary tale (it always is), it's a moral imperative not to let corporations get too big. Letting corporations grow big and still avail tax cuts, is like feeding your own cancer.
lots of people here defending amazon blindly seem to be unaware of the full picture of how amazon ads works in the context of the marketplace.
the point is that, if airfryer B is rival of A, and B buys ads (to let amazon show B ahead of A even if they searched for A), and A doesn't buy ads, then if B resorts to marketing to lower the quality just enough to compete, then all the quality focus of A will not end up increasing their sales.
more importantly, to have a good view on which products are good which one are the best is not available inside of amazon that easily. reusing sku, tricking people into buying inferior ones does not impact amazon in any way since return costs are paid by the fba vendor, or seller.
I'm hoping AI will disintermediate most retail and we'll finally get an aggregator that isn't going to add a tax on both sides of the market.
"Buy me the best Air Fryer" -> finds the best given my preferences and constraints and directly purchases it from the cheapest distributor
Always best to search across Amazon, Ebay and Walmart. Vendors sell the same stuff across all three channels.
Worth mentioning that Google has the same tax in Google Maps.
It is bad for the same reasons that the Amazon Tax mentioned in the post is bad…
Many times I search for a restaurant like McDonalds and the top result won’t be the one nearest to me…it will be a sponsored result for one that is farther away from me.
Pretty wild that Google does this. It’s bad for people. It’s bad because instead of picking the best choice to be the top, Google is showing a worser choice for money.
The same reason why this blog mentions that the Amazon Tax is bad.
Turns out we ended up with paid search, but paid for by who? :D
Seems bad.
"Your margins are my opportunity"
The great Bezos said ones and people, companies, stock market loved it. Now new CEO is noticing Amazon customers also have some margin and hence more opportunity for Amazon.
Amazon has many decisive conflicts of interest:
- improving search results vs less ad revenue
- promoting their own products vs merchants'
- streamlining the shopping vs trying to sell more stuff
As long as these fundamental conflicts aren't resolved, it's not going to improve.
> Amazon makes enough in search ad revenue to give every single one of their employees a $35,000 cash bonus and still have change left over.
Theoretically. Amazon doesn't give a shit about well being or enrichment of it's employees. Every single one of the them. They tried to squeeze the productivity and since the Stock has been doing well, many employees have made a reasonable money. But forget the well being or profit sharing aspects with the employees.
It looks less like an advertising but more like a rent extraction with a casi toll on commerce that ultimately gets passed on to consumers
I'm curious how similar/different this is to buying shelf space or aisle placement in physical stores.
I respect Seth quite a bit and have been an avid reader for two decades, but this post struck me as odd.
It reads as though he’s just discovering how the digital advertising industry works (and he's a marketer) ... not just Amazon, but also Google etc.
This has been true for years on Amazon and is true for most big services now.
Over time the concept of search has mutated from 'locate the exact item I'm looking for' to 'show me a list of semantic search results'. Somehow nobody noticed.
Oh and of course those are not random results - you can literally feel how the platform is trying to nudge you into buying what IT wants, not what you wanted. The search is just purchase intent, the platform will choose what you'll buy.
Powerful algorithms, subliminal design - I feel like a lamb in a dark forest full of wolves when I search on amazon, netflix, prime video ..
There are no '0 search results' anywhere.. each search yields thousands of results.
I remember what a revelation Google search was when it came out in 1999 - it would actually find the exact thing you were looking for ! You no longer had to sift through directories of links, you could just filter it..
We're back to pre-google, but it's a lot worse now, since this is by design, not by lack of technical knowledge of how to make search work.