The problem of misdirected advertising on Amazon came to light when a seller of advanced gaming computers discovered he was being charged thousands of dollars to advertise merchandise in California even though he had stopped selling his products there. — AP
Amazon.com Inc has pledged to make fixes to its advertising operation after mistakenly charging online merchants to promote products shoppers couldn’t purchase.
The problem came to light when a seller of advanced gaming computers discovered he was being charged thousands of dollars to advertise merchandise in California even though he had stopped selling his products there.
Rob Robinson says Amazon’s automated advertising system continued to promote his merchandise in the state even though customers couldn’t order it. Because he was being charged for ads that weren’t generating sales, Robinson says he made zero profit in November, December and January. Despite Robinson flagging the issue for several weeks, Amazon initially denied there was a problem.
After Bloomberg described the small business owner’s experience, the company acknowledged that he and other sellers paid for misdirected advertisements and that it was working to fix the problem. The company said it had apologised to Robinson and offered him a US$15,000 (RM70,537) refund – a fraction of the US$300,000 (RM1.41mil) he is seeking.
Amazon declined to elaborate on the breadth of the problem beyond saying it “affected a tiny fraction” of sellers. “We will similarly contact and refund any affected sellers, and are updating our processes to ensure any such ads are not charged going forward,” a spokesperson said in a statement.
The stumble highlights a limitation of Amazon’s fast-growing and lucrative advertising business. Geographic targeting is a standard feature offered by competitors, including Meta Platforms Inc and market leader Google, which for years has enabled companies to target users by location for searches like pizza joints, plumbers and psychiatrists. Amazon’s advertising business mostly focuses on matching shoppers with what they want without considering geography – and that’s why shoppers saw ads for Robinson’s products but couldn’t order them.
The company has an incentive to get a handle on the problem. In an antitrust lawsuit filed last year, the US Federal Trade Commission accused Amazon of boosting profits by selling irrelevant ads that degrade the customer experience. When shoppers in California clicked on Robinson’s computer ads, Amazon didn’t explain why the products weren’t available. It just said they couldn’t be delivered to their address and suggested that customers “choose a different delivery location”.
“Amazon created a situation where sellers can be charged for useless traffic, and it needs to be addressed,” said Yoni Mazor, founder of Getida, which provides consulting services to online merchants. “It could be a much larger problem than anybody realises.”
Robinson owns Computer Upgrade King, which sells computers and accessories to gamers. The firm employs about 80 people at two locations near Richmond, Virginia, including dozens of technicians who assemble custom computers using components from manufacturers such as Intel and Nvidia. Most of its merchandise is currently sold on Amazon’s online marketplace.
Robinson started getting notices from Amazon last year that some of his products were “restricted from sale in certain locations, although they are permissible for listing on Amazon”. Robinson knew regulations governing personal computer power consumption were rolling out in California and was content to sacrifice sales there to avoid paying for costly lab reports for the hundreds of specialised products he sells.
Robinson started to detect problems with his Amazon account in November when his sales dropped and he didn’t turn a profit despite having a robust advertising budget. After investigating, he realised his ads were being displayed to California shoppers who couldn’t buy his products.
On top of that, his advertisements were being shown nationwide on Amazon Business, a specialised marketplace designed for corporate and institutional procurement. Amazon had suspended sales of some products due to unusual activity on his account, but was still charging Robinson to advertise the blocked items. The company subsequently lifted the suspension and acknowledged overcharging Robinson.
At the time, Robinson said, “we were basically building computers for free.”
Amazon considered the potential for misplaced ads more than a decade ago, according to Rachel Johnson Greer, a former compliance employee who left the company in 2015. At the time, she said, Amazon was developing automated tools to ensure products sold on the site complied with state and local regulations.
Greer said the company decided against including ads in the tool’s development because doing so would have delayed the launch by a year, and managers were eager to make sure it was following applicable laws. She expressed surprise that Amazon hadn’t addressed the advertising situation long ago since so many states have their own regulations regarding toys, jewellery, children’s apparel and bedding to protect consumers from toxic materials.
“I’m confident this kind of thing happens very often,” said Greer, who now provides consulting services to online merchants. “This is just a terrible customer experience.”
In February, Robinson described the situation in a seller support forum on Amazon’s website, seeking reimbursement for misplaced ads and sounding an alarm for other merchants. An Amazon representative named “Susan”, who responded on the forum, was unsympathetic: “I understand the reason the ad is allowed to run is because many customers have multiple shipping addresses on their account, often in different states.” Robinson received a similar response from an Amazon advertising representative.
Robinson said the US$15,000 (RM70,537) refund offered by Amazon is of little consolation because the incident cost him between US$200,000 (RM940,500) and US$300,000 (RM1.41mil). He suspects the misplaced advertisements harmed his “conversion rate”, a key metric Amazon’s algorithm uses to determine a product’s popularity and how prominently it appears in search results. He said his sales dip coincided with the advertising problem.
For now, Robinson said he’s in survival mode and trying to migrate his sales off Amazon as quickly as possible. He’s investing in Google search advertisements that direct shoppers to his own website.
“The real problem with Amazon is there’s no escalation path when things go wrong,” he said. “You have to go to the media and embarrass them.” – Bloomberg
