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Amazon Restricts Ads for Competing Electronic Devices

Amazon (NASDAQ: AMZN) is preventing some of its competitors from buying key advertising in its search results, limiting their ability to compete with the company's own products, according to a report in The Wall Street Journal.

The e-commerce giant is keeping some rivals from buying "sponsored product" ads, which occupy premium real estate at the top of Amazon's online retail site. This gives the company's branded electronic devices -- like Fire TV, Echo smart speaker, and Ring Doorbell -- an edge over competing products like Roku's (NASDAQ: ROKU) streaming devices, the Google Home smart speaker by Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), and video doorbells by Arlo Technologies (NYSE: ARLO).

Image source: Amazon.

Amazon didn't deny the allegations, but instead provided a surprisingly snarky statement to The Wall Street Journal. "News flash: retailers promote their own products and often don't sell products of competitors," said Amazon spokesperson Drew Herdener in a written response. "Walmart refuses to sell [Amazon brands] Kindle, Fire TV, and Echo. Shocker. In The [Wall Street] Journal's next story they will uncover gambling in Las Vegas."

Search advertising is a small but fast-growing part of Amazon's business. The company's "other" revenue, which is composed primarily of advertising, grew 39% year over year in 2019, after notching triple-digit growth in 2018. This makes it the third-largest digital advertiser in the U.S., behind only Google and Facebook (NASDAQ: FB).

Amazon has already drawn the attention of regulators for its conduct regarding sellers on its platform and allegations it used third-party data to develop competing products. CEO Jeff Bezos testified virtually before Congress in July, saying the company had a policy prohibiting the use of seller data for those purposes, but admitted, "I can't guarantee you that that policy has never been violated."

Documents released after the hearing show that Amazon removes ads for competing products from its own product pages.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Alphabet (A shares), Amazon, Facebook, and Roku. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Facebook, and Roku. The Motley Fool recommends Arlo Technologies and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.


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