Amazon.com Inc. (AMZN) has suddenly stopped buying a popular type of advertising slot from Alphabet Inc.’s (GOOGL) Google, according to Bloomberg.
The e-commerce giant, like many of its peers, spends large sums of money in exchange for having colorful, image-rich ads appear at the top of Google search results. The slots, known as product listing ads (PLA), are popular among retailers because they increase the chances of their products being spotted by consumers. Besides images, Google Shopping campaigns also feature a title, price and store name. High demand also means that they are a major revenue generator for Google’s parent Alphabet — analysts estimate that this type of ad has grown at three times the rate of Google’s regular text Search ads.
Marketing firm Merkle Inc. noticed that Amazon stopped bidding for PLA slots at the end of April after analyzing Google shopping ad data that it tracks for clients. Two people familiar with the companies, speaking to Bloomberg, have since confirmed Amazon’s decision to pull out of its shopping campaigns on Google’s website.
What Is Amazon Playing at?
Amazon reportedly started bidding for the slots in late 2016 and, according to Merkle, spends somewhere in the region of $50 million per year on them. Its move to suddenly stop using the expensive service has been interpreted as a signal of its growing ambition to expand its own digital marketing offering and another sign of its increasingly frosty relationship with Google.
The online retailer currently offers similar sponsored product ads to Google on its flagship website. Expansion of this business has so far been slow, although brokerage Mizuho Securities USA Inc. predicts that Amazon’s ad offering has the potential to one day surpass Google. (See also: Facebook, Google Digital Ad Market Share Drops as Amazon Climbs.)
Relations between the two companies have also become increasingly hostile. Late last year, Amazon suddenly decided to stop selling some of Google’s hardware from its website. Shortly after, Google retaliated by blocking YouTube from Amazon’s streaming devices.
Google has been working on developing its own e-commerce offerings and even teamed up with Amazon’s retail rivals Walmart Inc. (WMT) and Target Corp. (TGT) on voice-based online shopping and delivery. The Mountain View, California-based company is also reportedly in talks to take a small stake in Flipkart after Walmart outbid Amazon for a majority position in the Indian e-commerce giant. (See also: Walmart Buying 77% Stake in Flipkart for $16B.)
A Google spokesperson said it is “not unusual for advertisers to adjust their campaigns at any time for any number of reasons.” Amazon declined to comment.