Maybe it slipped under your radar, or maybe it was front-page news on your feed, but either way you should have an understanding of the recent problems that a small number of sellers on Amazon have faced due to the company’s automated ad-placer.
If you sell products on Amazon and want to know more about this problem, which we can only assume Amazon is hurriedly working to rectify before any more costly incidents crop up, then read on.
What Went Wrong
The problem with the A.I. ad placements was that the automated system would go ahead and place advertisements for products in regions where the products were not offered.
One of the sellers affected by this is Rob Robinson, who claims that his company did not profit for months because the A.I. ad-placement platform on Amazon kept charging him thousands and thousands of dollars for months.
The problem, you see, is that his company sells advanced gaming equipment, only not in California, which has pretty strict advanced computing product standards that makes selling there too pricy a venture for Robinson.
Despite this, Amazon’s automated ad placement platform kept placing his company’s advertisements for California users.
That kept occurring despite Robinson repeatedly flagged the issue, which at first resulted in a swift denial that anything was wrong. After weeks and weeks of trying to get Amazon to help with the problem, he eventually won, sort of.
Resolving Amazon’s Problem
The ads stopped popping up in California, and Robinson indeed got a refund.
But it was not a full refund. He lost six figures in ads, estimated between $200,000 and $300,000.
His refund was for $15,000. Amazon apparently chose this figure because it represents the California portion of the ads that he placed overall, which went beyond California.
Amazon has acknowledged that this advertising problem is indeed an issue that exists for a small number of sellers on the platform. The company is offering refunds for any misplaced ads due to the automated platform’s mistakes.
Based on the information gleaned from Robinson’s case, Amazon will more or less calculate what it believes the refund ought to be.
What Businesses Advertising on Amazon Should Know
In the past year, the FTC has filed a lawsuit against Amazon that alleges anticompetitive, monopolistic practices.
Among these practices is the discouragement via higher fees of sellers to hawk their wares for lower prices on third-party platforms outside of Amazon. In an interview with CNBC, FTC chair Lina Khan claims that some sellers are only taking home $1 for every $2 made on Amazon. This results in what is effectively a 50% tax to sell on Amazon.
For consumers, this means that they will likely be paying higher prices for products because the sellers in response to the high fees will jack up the prices for their products.
If the FTC is correct in suggesting that Amazon’s position in the online “superstore” retail marketplace is indeed monopolistic, this would mean that any A.I. flubs that occur could result in less favorable resolutions for sellers.
Why would that indeed be the case?
Well, because the sellers are likely to be dependent on Amazon for much of their online sales. This will especially be the case if such sellers have done the math and decided that the books will balance better if they avoid the aformentioned third-party fees and sell exclusively on Amazon.
As a result, Amazon could be less motivated to offer better settlements with any sellers who run into problems with Amazon’s automated ad-placement platform.
Amazon’s Place in the A.I. Race
So, there was some obvious flubs that occurred here, but business owners should also know about Amazon’s overall place in the A.I. race.
But Amazon definitely has some high-powered A.I. to draw from. Specifically, it has chosen to partner with Anthropic, which was founded by former OpenAI (i.e., the ChatGPT creator) employees and now offers the chatbot Claude.
Google has also chosen to partner with Anthropic as well.
What a large company stands to gain from partnering with an A.I. company like Anthropic, which specializes in generative A.I. solutions, is to get ahead in the many areas that gen A.I. is poised to change.
This goes from everything like customer service to content creation.
For Amazon, this will result in improvements to the Alexa platform, which is starting to evolve into a ChatGPT rival.
An example of this is the auto-generated customer reviews that head the reviews section for a product on Amazon. These are like A.I. summaries of what the bulk of reviews have to say.
This is made possible through generative A.I. capabilities, with the application here being crawling the Amazon site to summarize information for customers.
Overall, Amazon’s investment in A.I. has been hitting some roadblocks, but for the most part will likely end up increasing the company’s strength in the online marketplace.
