Amazon filled its search results with irrelevant ads at the behest of founder Jeff Bezos to boost profits while driving shoppers to more expensive products, the Federal Trade Commission alleges in a new part of its antitrust lawsuit against the company, CNBC reports.

“In a key meeting, Mr. Bezos directed his executives to ‘accept more flaws’ as a way to increase overall ad impressions and increase Amazon’s ad revenue,” the FTC wrote in the public complaint section.

The agency noted that imperfect ads refer to those that are not relevant or only partially match what the user is looking for.

In late September, the agency and 17 states sued the company for allegedly using its monopoly power to raise prices online while making shopping worse and foreclosing on competitors.

The FTC filed a less redacted version of the complaint on Thursday that reveals new details about the impact of its growing advertising business on buyers and sellers who use its site.

Amazon began advertising on its site more than a decade ago, allowing brands and sellers to bid for top search results to make their product stand out from the competition.

This division has been very successful, being one of Amazon’s most profitable businesses. In 2018, Amazon overtook Microsoft to become the third largest advertising platform in the US after Google and Facebook.

In 2022, Amazon began highlighting ad revenue in its quarterly earnings reports, showing just how big the business had become.

Amazon said last month that its advertising business generated more than $12 billion in revenue in the third quarter.

Amazon’s general counsel, David Zapolsky, called the original complaint “factually and legally incorrect” and said its actions, challenged by the FTC, “helped spur competition and innovation in the retail industry and created more choice, lower prices and faster shipping for Amazon customers and more . opportunities for many businesses that sell on Amazon.”

Amazon did not immediately comment on the allegations against its advertising business, but Amazon spokesman Tim Doyle disputed other aspects of the complaint made public on Thursday.

Deterioration of user interaction

According to the new version of the complaint, Amazon’s advertising strategy worsened the shopping experience for users. The proliferation of unwanted ads has led to the removal of more relevant organic results. Instead, shoppers were offered products that “clearly weren’t what the shopper was looking for,” such as an ad for an LA Lakers jersey looking for a Seattle Seahawks jersey.

Other results were more puzzling. In one example given by an Amazon executive, the word “beech urine” came up first in a search for water bottles.

Amazon considered whether to place ad filters in search results, but company executives ultimately decided they shouldn’t be “limited” by restrictions such as how relevant products are to what shoppers are looking for.

Even though Amazon knew that imperfect ads hurt search performance, internal experiments showed that the practice had no detrimental effect on ad revenue and therefore bottom line.

The company went so far as to include a “defect cost” in its ad auction system “to make as much money as possible from its auctions.”

“Because advertising is so profitable for Amazon, even at higher churn rates, senior Amazon executives agreed ‘we’d be crazy not to’ increase the amount of advertising shown to shoppers,” the complaint states.

According to the FTC, increased advertising isn’t just annoying. It also helped push buyers toward more expensive items.

An internal Amazon study in 2018 found that the average price of sponsored products was higher than “neighboring organic products,” according to the complaint, which still redacted the percentage difference between the prices.

For an undisclosed percentage of impressions, the study found that “price [Produselor sponsorizate] at least double the organic result.”

The agency claims that Amazon’s advertising strategy not only worsened the experience on the platform for buyers, but also for third-party sellers.

Amazon admitted that the increase in advertising led to an increase in the amount required for sellers to get their products in front of buyers, the FTC alleged.

An Amazon executive explained that the cost would “likely be passed on to the customer and result in higher prices for customers,” according to the complaint.

The Federal Trade Commission said that, based on publicly available information, while Amazon engineers found a short-term reduction in the number of customers making purchases when sponsored ads were placed prominently, the effect “significantly outweighs ad revenue in the short term.” “, the team would say. (Source: News.ro)