The Amazon tax
TL;DR
Seth Godin argues that Amazon's search ads charge sellers for sales they would have made anyway. Shoppers end up paying that toll in higher prices and worse products.
The article
- Amazon makes nearly a billion dollars of profit a week from search ads. Godin says that would pay every Amazon employee a $35,000 bonus, with money left over.
- Amazon already knows which air fryer is best reviewed, least returned and best priced. A search ad exists to steer shoppers to a different one. Otherwise it makes the seller of the best one pay to keep a sale it already had.
- Ordinary ads can grow demand. Search ads mostly split a fixed pie between rival sellers. Godin cites a study arguing that a store with search ads sells fewer items than the same store without them.
- His publisher's best-performing Amazon ad targets the search "Seth Godin The Knot". It costs about a dollar a click. It reaches people who were already looking for his book.
- Shoppers pay the $50 billion a year in the end. Sellers cut quality to fund more clicks. Amazon, like Google before it, gains a reason to make organic results worse so sellers buy more ads.
- Amazon earned its customer-first reputation by cutting prices and opening its doors to small sellers. Godin grants that the ad system is legal. He says it shows the reputation no longer fits.
Why it matters
The post is short, and the points above cover most of it. Open the original for its links. One goes to Cory Doctorow's earlier piece. The other goes to the study claiming search ads reduce total sales, which is the evidence Godin's case leans on.
The discussion
A huge, mostly angry thread. Most commenters agreed that Amazon search has turned hostile, and traded stories of Google Maps and the app stores doing the same. The fights were over Godin's claim that Amazon knows the best product, over paying to show on your own book's search, and over legality.
Does Amazon know the best air fryer, and how does a new one get seen?
The most-argued point was Godin's claim that Amazon knows the best product. Critics said no single best exists once price, features and taste differ, and a new product with no reviews can't rank without paying. Defenders answered that Godin targets ads on searches for a specific product, not all ads. Others proposed launch discounts, ranking that tests new items, or trusted reviewers, and one long exchange agreed Amazon could at least flag high-return products.
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?
Put another way, the buyer uncertainty about your product *actually, concretely makes your product worse*. … All else equal, either your product is *not* the best product, or you need to offer a lower price.
Paying to be found on your own name
Many readers called the "Seth Godin The Knot" ad a protection racket, since a rival buys the slot if the publisher stops bidding. Small businesses and app developers said they pay the same toll on Google and Apple. Others called it wasted money, since those searchers would buy anyway, and said good advertisers measure the sales an ad adds. A few noted that shoppers who don't see the book near the top may assume Amazon doesn't stock it.
Finally, they ask him how he does it. He says, "I stand in the waiting area of the restaurant".
It’s worse than that. If that employee isn’t standing in the waiting room, handing out coupons some other restaurant’s employee will be standing in the waiting room, handing out coupon for the restaurant next-door.
Search is broken on purpose, and people work around it
Commenters listed what they called deliberate damage: no exclusion operators, filters that don't hold, and a phone screen of sponsored items for "red air fryer". Google Maps sending people to rival businesses and app stores ranking knockoffs came up as the same pattern. The workarounds were sorting by Best Sellers, ad blockers, searching Amazon through Google, and leaving for Costco, Etsy or local shops. Others replied that Etsy has the same problems and that nobody matches Amazon's delivery.
Years ago Amazon intentionally nerfed their own on-site search into *complete* uselessness. A step at a time they removed the ability to exclude a term by prefixing a '-', then they removed grouping terms into a phrase either with quote marks or plus+signs.
I clicked through it into Google Maps and since it had the full address specified I just trusted it. Well, it turned out that the first result was actually an ad for a competing doctor 20 minutes in the wrong direction.
Fraud, trademark, or antitrust?
One commenter proposed suing for fraud and trademark infringement, but others said labelled ads deceive nobody. Bidding on a rival's brand is legal, they added, citing the FTC's loss against 1-800 Contacts and Australia's against Google. Several wanted a competition-law fix, and others raised SABRE, where regulators barred an airline's booking system from favoring its own flights. Others noted that Amazon had just moved shoppers into binding arbitration with a class-action waiver.
The day someone can sue me because they searched for something on my web site and what they expected didn't come up, my web site is effectively legally prevented from having a search box.
Back in 1984 this "Preferential display" was considered illegal by the US government. How times have changed....
Nothing new, and Godin overstates it
A sizable minority called this shelf space and slotting fees moved online, since publishers have always paid bookstores for placement. Opponents replied that a store's shelf is finite and the same for everyone, while Amazon can bury the exact item you typed on page 23. Others picked at the rhetoric: "legal theft" contradicts itself, the opening mixes up revenue and profit, and ad costs fall on sellers too. One commenter checked the $35,000 figure against Amazon's headcount and found it reasonable.
Distribution channels have never been neutral champions of the consumer.
Huh, retail store has fixed amount of shelf space, it can't keep infinite variants, but Amazon has infinite real estate it can keep the exact item you search for on page 23 instead of page 1.
Consensus
Amazon's search results are worse than they used to be, and ads fill much of the first screen. Google search, Google Maps and both app stores are going the same way. Most also agreed that paying to appear on a search for your own product is a toll. It exists only because a rival would buy the slot otherwise.
Dissent
A vocal minority defended the ads. There is no single best product, they said, new sellers need some way to get seen, and supermarkets have sold shelf space for decades. They also noted that Godin, a marketer, is complaining about how marketing works.