Amazon, Zappos, Endless, And Me

Posted: July 22nd, 2009 | Author: miconian | Filed under: Media And Advertising | Tags: Amazon, amazon associates, branding, direct response, endless, zappos | Comments

About two years ago, I was hired by the now-nearly-defunct agency Fly Communications to build and run their fledgling media buying department, which is to say, a group of people who make decisions about where advertisements appear. The reason Fly suddenly needed a media department was because their client, Amazon, had asked them to place the online ads that Fly was in the process of creating. These ads were meant to drive traffic to various new Amazon properties, including Amazon Grocery (which still exists, though, now as then, it doesn’t really have its own brand), Amazon Unbox (a weirdly named video download service that has since morphed into the much improved Amazon Video On Demand), and Endless, Amazon’s online shoe store, an obvious competitor for Zappos.

At first, I was excited about working to promote Endless, which, then as now, was a much better site than Zappos. Endless was cleaner, more professional-looking, easier to navigate, and appeared to have better stuff. Surely, I thought, all we had to do was tell the world about Endless, and it would give Zappos a serious run for its money.

But, as it turned out, this was not what Amazon wanted to do. The reasoning for, and consequences of, this strategy beg a lot of interesting questions about today’s announcement that Amazon is acquiring Zappos.

Amazon is a “direct response” marketer, meaning that it’s only interested in advertising if that advertising has an immediate and tangible payoff. Specifically, its measure of success, at least at the time, was based purely on a formula that essentially measured return on investment (ROI). So, suppose we spent $500 on a given week, to run ads on a given site. At the end of the week, if those ads hadn’t earned back the $500 through purchases on Endless, the media buy was essentially considered a failure.

The figure of $500 is not an arbitrarily small one, used by me just to make a point. Our tiny monthly budgets were spread over a small group of sites, creating even tinier budgets per site. Just to give you a frame of reference if you don’t work in media: I would never recommend that a major brand spend less than $10,000 per month per media property. It’s just not worth it. And it wasn’t worth it for Endless, either.

Amazon, with its “associates” program, essentially created online affiliate marketing, a method by which people or companies outside Amazon can advertise on behalf of Amazon on their own sites, and be rewarded with a percentage of the profits. It was telling that our media-buying success (or lack thereof) for Endless was measured through the “associates” mechanism, as if we, as an agency, were essentially just a glorified affiliate.

“Jeff [Bezos] doesn’t believe in advertising,” our Amazon clients often told us, in order to let us know that there was no way for us to possibly win. And the statement was clearly true. Not only did Bezos not believe in advertising, but he didn’t hire anyone who knew anything about it. None of our client contacts had a marketing background, nor did any of them understand the terminology we used. For example, I was once derided by a contact at Endless for referring to a “big box ad” in an email, as if I was speaking in childish generalities. But “big box” is an official IAB term, meaning 300×250 pixels, understood by anyone who had worked in online marketing for a week.

Another time, after we ran Endless ads on a popular blog, a user emailed the blogger, thanking her for the ad, bubbling over with enthusiasm for how perfect it was, how well it went with the site, and how much she loved buying shoes online. The blogger forwarded the note to me, and I forwarded it my contacts at Endless, along with a screenshot of the ad in context. It was a ridiculously good situation, the kind of thing that any media buyer is thrilled to have happen just one or two times in their career. But waiting for a response from Endless was like listening for a coin dropped into a bottomless well. Eventually, a senior manager responded. He didn’t address the note. Instead, he complained that he had to refresh his browser five times before finding the ad on the site (this was a function of the campaign’s budget), and that the entire 160×600 ad wasn’t visible on his monitor at the moment that he loaded the site.

Eventually, the Endless internal marketing team was taken over by a new director. Apparently, this director had been brought in to push even harder in the direction of direct response, and to find out why that ornery advertising agency was still claiming success in situations where we were clearly operating at a loss. Had we made Endless, a largely unknown retailer with a high-profile competitor, more money than the tiny budgets they’d given us over the course of a few months? No? Then what were they paying us for? On our first call with the new director, she fairly shrieked, promising us a reckoning for our sins. Our response was, perhaps, not the one she was looking for. Shortly thereafter, Fly was fired from the Endless account.

And today comes the news that Amazon is acquiring Zappos. Well, that’s another way to go.

Had you even heard of Endless before reading this blog post? How much of an advertising budget do you think it would have taken to make you aware of it? How much money would Amazon have had to actually spend in order to really pit their own completely unknown but superior site against their competitor?

Less than the value of the stock that Mr. Bezos just gave Zappos, that’s for sure. And it wouldn’t have paid off right away, either. But that’s advertising. Sorry, I mean branding. When I start talking about Amazon, I temporarily forget that word even exists.

According to the Zappos CEO Letter, Zappos will not be absorbed into Amazon, but will remain its own business, carrying on as before. The CEO letter says:

[Amazon is] not looking to have their folks come in and run Zappos unless we ask them to. That being said, they have a lot of experience and expertise in a lot of areas, so we’re very excited about the opportunities to tap into their knowledge, expertise, and resources…

I wonder what will happen when Amazon audits Zappos’ marketing program. Will Amazon tell Zappos to stop advertising?

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