Microsoft’s latest ecommerce move is being called a brazen attack on Amazon.com Inc.’s retail dominance.
Last month, Microsoft launched a new product called PromoteIQ that enables retailers to sell advertising on their websites. PromoteIQ is similar to Amazon’s Sponsored Products program, where ads appear in the search results and on Amazon product pages. It also gives merchants control of their own data—intent-based and audience insights—so that they can more efficiently market their products on and off their own websites.
In recent years, advertising has become big business for both B2B and B2C ecommerce companies, especially Amazon. According to its third-quarter 2019 earnings report, Amazon’s ad revenues hit $3.6 billion, up over 45% year-over-year. Microsoft’s new product will let merchants incorporate advertising into their ecommerce sites and measure campaign performance. It’s also integrated with Microsoft Advertising so that merchants can use their data to inform advertising on and off of Bing.
Given that the total B2B addressable market is estimated to be $1.4 trillion by 2021—approximately double Amazon’s consumer ecommerce business—according to Bank of America, B2B merchants should look closely at the potential impact Amazon could have on their business.
Addressing big issues for manufacturers
Microsoft’s solutions address massive issues for both retailers and manufacturers. They often find themselves backed into a corner to leverage Amazon for exposure and market reach, but lose a sizeable chunk of profits because of the cut Amazon takes and are squeezed further because they lack the data insights that Amazon withholds. Ultimately, they are both reliant on, and at a disadvantage to, Amazon’s whims.
Microsoft is solving this in a way that encourages business growth, not erosion, and is becoming a deeper partner with merchants instead of a competitor. Microsoft’s solution becomes more sophisticated as businesses grow. With PromoteIQ, small and mid-sized businesses can advertise and expand their reach, with a limited budget risk of having it cut into their margins or compete with them.
Microsoft’s move seems to be part of the industry’s greater self-examination of the role Amazon has in commerce overall. Just before the holidays, brand manufacturer Nike said it would stop selling directly on Amazon. Since then, more and more manufacturers, including Ikea, have opted to bypass the Amazon marketplace. Economics are a big reason, but the online retail giant has also come under increased scrutiny for selling questionable products on its marketplace.
Whether 2020 is the year the tide will turn for Amazon has yet to be seen. But 2020 is the year that we’ll see more manufacturers and merchants seek to take back control of their businesses from third parties. That’s what makes Microsoft’s announcement so interesting.
Tim Beyer is president and CEO of Sana Commerce North America, a provider of ecommerce technology and services. Follow him on LinkedIn.