Analyst Argues Agentic Commerce Threatens Amazon's Ad Business
Freda Duan argues that agentic shopping agents could disintermediate Amazon's roughly $100 billion ad business and erode its customer relationship, while Amazon's logistics could open a new revenue stream. She also contends ad spend and take rates will converge, citing OTA economics, and links to a deep dive on the topic.
Original post · 2 min read
Largely agree.
1/ Agentic commerce's impact on $AMZN
Ads rev ($100B rev, or est. 50% of operating profit): real disintermediation risk.
GMV: depends. If $AMZN is truly "cheaper, faster, better", an objective agent should send more GMV to $AMZN. But I personally doubt $AMZN’s GMV share grows meaningfully in an agentic world. Just look at the $50B in marketing exp. $AMZN throws out today - large platforms have an "unfair advantage" bc they can afford higher CAC.
Long-term value / customer ownership: intrinsic value should go down if $AMZN loses the top of the funnel. You may still get the trx and the buyer’s info, but you lose browsing behavior, retargeting, cross-sell opps, and ultimately the customer relationship.
Potential upside: $AMZN can open up its best-in-class logistics backbone to other merchants = new rev stream (which it is already doing a little).
The risk feels more skewed to the downside, imho: top of funnel → infrastructure layer.
2/ What happens to ads as an industry
Under agentic commerce, ad spend and take rate - which ppl historically think of as distinct business models - will converge.
In a fully agentic world, ads as an industry could theoretically "disappear." But that doesn’t mean the ad dollars (~$300B in the US) disappear. Sellers will still need (and want) to pay digital tax on distribution. Whether that comes in the form of ads or a take rate is largely semantic.
Take OTAs ($BKNG $EXPE) as an example. Say half of their bookings and traffic are direct, and the other half indirect, mostly through $Google. For the indirect portion, the companies basically break even given the high CPCs they pay $Google. Take rate on the direct portion is ~15%. So even though the cost is paid in the form of ads, the equivalent take rate OTAs pay Google is effectively ~15%.
An agent charging 2%, 5%, or eventually 10%+ of GMV is therefore not necessarily introducing a new cost. It may simply be repackaging an existing acquisition cost from CPC into CPA / take rate. And agents @Muse will probably start cheap.
3/ What holds true no matter what (pre- or post-agentic world):
A. Owning top-of-funnel customer intent = pricing power. Losing direct traffic means losing much more than the immediate transaction.
B. Commerce winning formula (is always) = cheaper, faster, better.
++
A more verbose version: robonomics.substack.com/p/agentic-commerce-dee…
1/ Agentic commerce's impact on $AMZN
Ads rev ($100B rev, or est. 50% of operating profit): real disintermediation risk.
GMV: depends. If $AMZN is truly "cheaper, faster, better", an objective agent should send more GMV to $AMZN. But I personally doubt $AMZN’s GMV share grows meaningfully in an agentic world. Just look at the $50B in marketing exp. $AMZN throws out today - large platforms have an "unfair advantage" bc they can afford higher CAC.
Long-term value / customer ownership: intrinsic value should go down if $AMZN loses the top of the funnel. You may still get the trx and the buyer’s info, but you lose browsing behavior, retargeting, cross-sell opps, and ultimately the customer relationship.
Potential upside: $AMZN can open up its best-in-class logistics backbone to other merchants = new rev stream (which it is already doing a little).
The risk feels more skewed to the downside, imho: top of funnel → infrastructure layer.
2/ What happens to ads as an industry
Under agentic commerce, ad spend and take rate - which ppl historically think of as distinct business models - will converge.
In a fully agentic world, ads as an industry could theoretically "disappear." But that doesn’t mean the ad dollars (~$300B in the US) disappear. Sellers will still need (and want) to pay digital tax on distribution. Whether that comes in the form of ads or a take rate is largely semantic.
Take OTAs ($BKNG $EXPE) as an example. Say half of their bookings and traffic are direct, and the other half indirect, mostly through $Google. For the indirect portion, the companies basically break even given the high CPCs they pay $Google. Take rate on the direct portion is ~15%. So even though the cost is paid in the form of ads, the equivalent take rate OTAs pay Google is effectively ~15%.
An agent charging 2%, 5%, or eventually 10%+ of GMV is therefore not necessarily introducing a new cost. It may simply be repackaging an existing acquisition cost from CPC into CPA / take rate. And agents @Muse will probably start cheap.
3/ What holds true no matter what (pre- or post-agentic world):
A. Owning top-of-funnel customer intent = pricing power. Losing direct traffic means losing much more than the immediate transaction.
B. Commerce winning formula (is always) = cheaper, faster, better.
++
A more verbose version: robonomics.substack.com/p/agentic-commerce-dee…
Harry Stebbings @HarryStebbingsAmazon is right to block Muse.
“One, you do not get any revenue from your ad business, and Amazon’s ad business is now larger than their e-commerce profits.
The second thing is the basket size gets reduced. If I do this, I just order the thing.
If I block them, they will probably come to me anyway, because I am Amazon. So I have leverage.” @rodriscoll
Love to hear your thoughts @juokaz @FredaDuan @scotwingo @harleyf
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