Amazon's Geographic Targeting Flaw Leads to Seller Losses and Customer Confusion

Key Takeaway

• Amazon admitted to charging sellers for ads on unavailable products due to a geographic targeting flaw, affecting customer and seller experiences.
• The issue led to significant financial losses for sellers, with one reporting a $300,000 loss but only receiving a $15,000 refund from Amazon.
• This incident highlights broader concerns about Amazon's advertising system and its impact on the platform's reputation and seller relationships.

Advertising Missteps at Amazon

Amazon.com Inc. has acknowledged a significant oversight in its advertising operations, which led to online merchants, including Rob Robinson, the owner of Computer Upgrade King, being erroneously charged for ads promoting products that were not available for purchase by shoppers. This issue came to light when Robinson noticed he was being billed thousands of dollars for advertising his gaming computers in California, a state where he had ceased sales. Despite his efforts to resolve the matter, Amazon initially denied any problem existed. It was only after media attention that Amazon admitted to the error, offering Robinson a $15,000 refund, a fraction of the $300,000 he claims to have lost.

Geographic Targeting Flaw

The core of the problem lies in Amazon's advertising system's inability to consider geographic restrictions effectively. Unlike its competitors, such as Meta Platforms Inc. and Google, which have long offered geographic targeting, Amazon's system failed to prevent ads for Robinson's products from being shown to customers in California, where the products could not be shipped. This oversight not only resulted in financial losses for sellers like Robinson but also degraded the customer experience, as shoppers were led to products they could not purchase without any explanation from Amazon.

Broader Implications

This incident has raised concerns about the potential scale of the problem and its impact on Amazon's reputation and seller relationships. Yoni Mazor, founder of GETIDA, highlighted the risk of sellers being charged for "useless traffic," suggesting that the issue could be more widespread than initially thought. The situation also brings to light Amazon's past decisions regarding the development of automated tools for compliance with state and local regulations, with former employee Rachel Johnson Greer expressing surprise that the advertising aspect was not addressed sooner.

Seller's Struggle and Response

Robinson's experience underscores the challenges sellers face on Amazon's platform, particularly when errors occur. Despite the refund, the financial damage and the potential long-term impact on his business's visibility on Amazon due to a lowered conversion rate have pushed Robinson to seek alternatives for selling his products. His move towards using Google search advertisements to direct customers to his own website reflects a growing trend among sellers to diversify their sales channels in response to issues encountered on major online marketplaces.

Street Views

• Yoni Mazor, GETIDA (Neutral on Amazon's advertising issue):

  "Amazon created a situation where sellers can be charged for useless traffic, and it needs to be addressed. It could be a much larger problem than anybody realizes."