Retail Media's Dirty Secret: Why Your Amazon Ads Are Training Your Competitors
The Intelligence Transfer That's Happening Every Time You Buy Amazon Ads
Amazon Ads' business is so large that removing it from the equation dramatically reduces the size of the overall retail media market, with Amazon estimated to be larger than all other U.S.-based networks combined. But this dominance comes with a hidden cost: every Amazon ad campaign teaches Amazon about your customers, pricing, and market positioning.
The Intelligence Transfer Mechanism
Amazon Ads accounts for 75% of all retail media ad spending, with over 60% of people who search for a product online starting their search on Amazon. This scale means Amazon sees more competitive intelligence about your market than you do about your own customers.
Every Amazon ad campaign reveals customer preferences, price sensitivity, seasonal patterns, and competitive vulnerabilities. This data then informs Amazon's private label strategy, supply chain decisions, and competitive positioning. Amazon's Retail Ad Service offers retailers the ability to place and sell ads directly on their own ecommerce sites, potentially reshaping the retail advertising landscape.
The Walmart Wall Garden Honesty
Walmart's retail media network, Walmart Connect, generated $3 billion in sales in 2023, with marketplace sellers being the fastest-growing segment. Walmart represents a more honest approach—they're explicit about using advertising data to inform broader business decisions. Amazon maintains the fiction that advertising and commerce operations are separate.
Walmart was a distant second to Amazon, only capturing $3.4 billion compared to Amazon's $47 billion, but saw 28% year-over-year growth. This growth reflects brands' growing awareness of the intelligence transfer problem with Amazon.
The Retailer-as-Competitor Endgame
Retail media is on track to hit $106 billion by 2027, with giants like Amazon and Walmart dominating, while innovators like Instacart, Kroger, and Home Depot carve out specialized niches. As retailers develop their own brands, they're using advertising data from brand partners to identify product opportunities and optimize positioning.
Specialty retailers like Home Depot and Wawa, as well as companies beyond traditional retailers, like Chase Bank, United Airlines and now Re/Max, have recently unveiled their own ad offerings. This proliferation means every retail media investment potentially creates a future competitor armed with your customer insights.
The ultimate irony: brands are paying to train their competition while weakening their own direct customer relationships.