Amazon’s DSP and Google’s DoJ Filing

Over the last month, we’ve been researching AMZN’s ad business with Former employees, agencies, and competitors.

This interview with a Former AMZN Ads Director shares the history and opportunity for AMZN’s DSP to monetise its 1P purchase data on AMZN owned & operated properties and outside AMZN’s walled garden. We also discuss the potential implications of the DoJ suing Google for monopolistic behavior in its Network business.

This is the third interview in a 4-part series:

  1. Next Week: AMZN Ad Agency Perspective

From the interview last week, this quote particularly stood out:

What I see in various roles I've been in recently is that actually, people are beginning to accept that this cookie data stuff is moving on. The reason retail media and Amazon and those types of businesses are growing, is because their data is first party data. What Google is, and Meta is – to a great extent – is a guess at first party data. It's not real first party data. - Former Director at AMZN Ads

Google and Facebook’s data is ultimately a guess on what users may purchase based on certain behavior. On the other hand, retailers have data on what consumers actually purchased.

Retail media platforms like AMZN and Walmart / TTD combine first-party purchase data with closed-loop measurement online and offline. At scale. AMZN recently launched its Marketing Cloud and partnered with IRI to enable marketers to better measure and attribute returns across campaigns on and off-Amazon:

You mentioned Amazon Marketing Cloud. The way they're tying together their cloud infrastructure helps their argument for why you would invest more in upper funnel. They also have a partnership with IRI to measure the efficacy of upper funnel spend, not only for Amazon sales but all offline sales. Prior one-off studies investing in Amazon DSP saw directional lifts in club sales, but now they're getting to a finer point having IRI's POS data as part of their closed loop analysis within their marketing cloud. That is also a hook to AWS, their other most profitable business. - Current EVP at Kenshoo

The fact GOOG and FB have ‘lookalike’ data isn’t a problem given they own so much demand on their owned properties such as Search and Instagram. Even in a cookieless world, advertisers have to spend on the properties with scale.

But outside the walled gardens is different. Google's Display Network runs the pipes for website publishers to monetise their inventory. This relies heavily on GOOG's unique collection of cookies it utilises around the web. Last year, GDN generated ~$31bn in revenue across desktop and mobile.

It's the desktop segment of Google's Network business that is under real pressure from the DoJ for monopolistic behaviour. Although GDN for desktop is a small portion of GOOG's business, given its vertically integrated stack, any adverse ruling from DoJ could be material. By our rough estimate, GOOG's Desktop Network business could be earning ~$4-5bn in operating income per year.

The potential outcome could also have significant implications for independent advertising companies like The Trade Desk and how new channels like CTV will be monetised. It also highlights why Amazon's DSP and Marketing Cloud rollout could prove to be strategically significant.

This interview explores the history of Amazon’s DSP buildout, the potential implications of the DoJ’s filing against Google Display Network, and potentially just how big AMZN ad business can get.

Google Workspace vs MSFT 365: Enterprise GTM Strategy

Google's Workspace SaaS offering mainly serves SMB customers. A Former Google Product Lead Manager shares GOOG’s go-to-market strategy to attack MSFT 365 in the enterprise segment:

"Most often, the wedge would go in one of two places. It would either go into a SharePoint use case, so they're using either SharePoint online, or they're using some legacy version, and it sucks, and it's hard to collaborate. Capitalizing on that with Drive was a great entry point. The other places that we would go in would just be around real time collaboration, or large files. Large files are super problematic for Microsoft. For some reason, they just can't seem to do it and then you have to change where you store it based on how big it is, or who you want to share it with. Those are the best places. - Former Google Director

The success of Microsoft Teams has helped bridge MSFT Office from legacy file to cloud architecture:

I think Teams has had tremendous success. I would say there are two things to dig into on the point you just made. The first is that Microsoft definitely does have a technical hurdle there, and it's all built around the one thing that also underpins why they're so successful and that's "the file". The Office file is the very reason that they have such a huge incumbent advantage. It's also the very reason that they can get better at collaboration in real time. That's where it gets difficult. Teams is great at this, which is trying to bridge the gap between all these old files and lots of other things that are happening and putting them into one place where the user can do this. - Former Google Director

As always, distribution trumps product:

But the other thing that Microsoft is really good at, which I think is part of broadly why they continue to win is, they've got an army of sales folks and customer success folks who are out there as soon as these things are released, making sure that they're getting adopted. I think that's the biggest challenge. - Former Google Director

Costco's Culture

A 25-year veteran of Costco shares stories on how Jim Sinegal created a company willing to sacrifice pure efficiency for the sake of a quality of customer experience:

Jim initiated the double line parking lots at all the Costco locations; I’m not sure whether that’s in Europe yet probably because of land constraints there. In North America, with very few exceptions, we painted all the parking lots with double lines and they lost 12% of their parking spots because they thought it was more important to make sure that your shopping experience was pleasant from the moment that you drove in to the parking lot. You didn’t have to squeeze your way in-between two cars, you didn’t have to worry about your car being dinged or someone trying to pass between two cars with their shopping trolley, and if the trolley could actually make it between two cars. All these little things created a strengthened, hardened commitment to making sure that you’re doing the right thing all the time, and it was like that on those warehouse visits - Former VP at Costco

Moonpig & UK Greeting Cards

Moonpig Group is an online UK greeting card and gifting business that is down nearly 75% since listing two years ago.

The business was previously PE-owned, hence the leverage, and was offloaded to public markets at almost peak-COVID e-commerce boom. The company earns solid 20% EBIT margins, 30%+ ROIC, and requires little capital to grow. It's customisable formats also has structural advantages over brick retailers that take risk designing, buying and owning card inventory.

It also has interesting cross-selling opportunities as a Former Director of MOON shares:

Moonpig are strong when it matters; your close family and friends. The average active Moonpig customer buys five or six cards per year when they are actively transacting. You could argue why it took until 2018 to find out that was the case, therefore gifts had to match that, because having casual gifting like a box of chocolate doesn't work when you want to please and greet somebody close to your heart and important in your life. Nickyl invested more into traditional category management, purchasing people who knew the gifting segments better rather than we were doing before, which was simply considering gifting as a supply chain function. I selfishly wanted a set of gifts with a long shelf life which was easy to manage. Nickyl brought more flesh and soul into that to target meaningful gifting which is both well-managed and well-thought. Before I left, there were some meaningful, significant, attractive partnerships starting with the likes of Star Wars, rather than simply casual gifting." - Former Director at Moonpig

Kelly Partners Group: UK Expansion & ETL Global

Over the last 15+ years, Kelly Partners Group has been successfully acquiring small accountancy practices across Australia. On the other side of the world, in Germany, ETL Global has been following a near-identical strategy for 40+ years and is ~10x the scale of KPG.

This interview explores how ETL has been acquiring assets in the UK and the opportunity for KPG to enter new markets like the UK:

When you are on this road, you need critical mass to benefit from a chief executive officer who is experienced in running firms. There's a lot you can buy in if you have the critical mass, although there comes a time when it needs to be in-house. The most important thing is the person at the top, which is not that easy because the wrong person cannot take the partners with them, so that is also a disaster. If I haven't put you off yet, I don't think I ever will, but if Kelly have critical mass and the right people within their own organization or access to the right people going forward, there are opportunities. You have to be cognizant of embracing the vendor, partner and shareholders, which is what ETL do. Post-acquisition, ETL are very good in liaison but they stay out of the way, as long as everybody is making what they forecast in their budgets." - Former Partner at Mid-Market UK Accountancy Firm

EQS Group & Compliance Software

EQS Group expects a significant pickup in adoption of Whistleblowing software in Germany now that the EU Directive has been transposed into national law. This former Compliance Manager at KPMG explains how GDPR compliance drives the need for a formal software solution:

Clearly, the whole topic of processing of personal data in compliance with the European regulation on this matter, is one of the key drivers that is still of very high importance to European clients when it comes to whistleblowing solutions. In relation to the EU directive on whistleblowing, one of the key challenges that EU employers face that will give a formal solution, and also a clear competitive advantage, versus a simpler in-house solution is the topic they need to be able to evidence such compliance. Compliance with data processing regulation, and also compliance with all the formal requirements that the whistleblowing directive brings forward. I think this is one of the matters that clearly drives demand for such professional format solutions like EQS provides. - Former Compliance Manager at KPMG

Bergman & Beving, Luna, & Nordic Tools Distribution

Further to our work on the Nordic B2B distributors, this interview explores the history of B&B and tools distribution:

In Sweden, we use the word grossist which is someone who has a broad product catalog, but it's mostly not their own products. Manufacturing companies give them products and they do the logistics. Sweden used to have independent Iron Shops which were family-owned and wholesalers performed the logistics and consulted on which products would be good to have on their shelves. Resellers started consolidating and many thought they should move their warehouse logistic services in-house. Ahlsell has the best logistics solution in Sweden in construction and industrial distribution. They were Luna customers but built independent shops owned by the Thomée Group.