Amazon’s price changes are a window into some of the media industry’s fundamental challenges

Amazon and supply-side platforms may have come to a temporary arrangement on how to process cost increases for advertiser demand over the next couple of months, but in the meantime, some big decisions will have to be made.

Amazon’s rise in the ad industry is well documented with its suite of advertising services equipped to rival its Big Tech peer set with media-generated revenue up 21% year on year during the last quarter, nearing $9.5 billion.

Among publishers especially, Amazon benefits from the fact that it’s simply ‘not Google’ – very much the establishment figure in online media monetization. Although, as Wall Street’s demand for further revenue growth steepens, it too has to wield both stick and carrot in equal measure, according to sources.

Shifting the cost

To recap, last month Amazon Publisher Services gave SSPs (or “TAM buyers” to use its precise wording) a four-week notification of a price change for access to its buyers. The cost is moving from $0.01 CPM to 2.5% of spend with the sticker shock causing some rancor and confusion in recent weeks.

SSPs were prepared to ‘eat’ the $0.01 CPM, but a 2.5% of spend fee is too bitter a pill to swallow with sources estimating costs could increase 4-to-5%, ergo the consensus among sell-side ad tech was that the cost would now have to be shared. And it’s from here that things kicked off with publishers receiving conflicting messages from APS and SSPs in the subsequent weeks.

According to multiple pieces of documentation seen, and verified, by Digiday, SSPs (in general) proposed levying the cost increase on publishers by reducing the monthly check they make out to media owners.

Although, a subsequent note from APS appeared to paint such proposals as contrary to their contracts, claiming that TAM runs a first-price auction with net bids, which ensures the highest bid wins and requires buyers to pay the publisher what they bid.

Such an interpretation suggests TAM buyers are contractually required to submit net bids to Amazon, and would thus deem the ‘gross bidding proposals‘ outlined by the SSPs above as invalid. These developments generated a state of mass confusion, not to mention anguish, among publishers.

In short, an eleventh-hour compromise was reached, albeit temporary, with SSPs granted permission to bill publishers per their initial proposals, provided they have approval from individual media owners.

Although, multiple publisher-side sources questioned the likelihood of media owners granting SSPs permission to reduce their monthly paychecks. After all, who will welcome the prospect of earning less money?