Amazon search results flooded with irrelevant "defect ads" were allegedly done under the orders of founder Jeff Bezos, as per the Federal Trade Commission (FTC).
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FTC Reveals Bezos' Plans
In a now-public part of the complaint, FTC wrote that Bezos directed the executives to accept more defects in order to increase the total number of advertisements shown and eventually drive up Amazon's advertising profits. As per the commission, "defect ads" are irrelevant or somewhat relevant only to the searched item of the customer.
The FTC and 17 other states sued Amazon after its alleged abuse of monopoly power to hike up prices across the web. In addition, the company is also allegedly degrading the shopping experience and excluding its rivals.
The e-commerce giant started running ads on its site more than ten years ago. This allowed brands and sellers to bid for higher placement in search results and have their products show up first among their competitors. For years, this has been Amazon's higher-margin business.
Amazon Ads Strategy Affect Customer Experience
Customers have been complaining about the new version of Amazon's ads strategy, stating that it only worsens the shopping experience. The defect ads also affect sellers as more relevant and organic results are being pushed at the bottom of the selection, thus making it harder both for the customer and the sellers.
CNBC reported that even after Amazon found out how bad the defective ads were, the company continued to utilize it and went as far as having a "cost of defect" into its ad auction system in order to drive more money from ad auctions. "With advertisements being so profitable to Amazon even at higher defect rates, senior Amazon executives agreed, 'we'd be crazy not to' increase the number of advertisements shown to shoppers," the complaint added.
FTC also alleged that Amazon engineers found a short-term dip in customer purchases upon seeing sponsored ads. However, the effect "vastly outweighed in the short term by ad revenue."
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