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The Amazon logo displayed on a smartphone and a PC screen.
Pavlo Gonchar | LightRocket via Getty Images

Search for “toothpaste” on Amazon, and the top of the web page will show you a mix of popular brands like Colgate, Crest and Sensodyne. Try a separate search for “deodorant” and you’ll first see products from Secret, Dove and Native.

Look a little closer, though, and you’ll notice that those listings are advertisements with the “sponsored” label affixed to them. Amazon is generating hefty revenue from the top consumer brands because getting valuable placement on the biggest e-commerce site comes with a rising price tag.

“There’s fewer organic search results on the page, so that increasingly means the only way to get on the page is to buy your way on there,” said Jason Goldberg, chief commerce strategy officer at advertising firm Publicis.

For consumers looking for toothpaste on Amazon, getting to unpaid results requires two full swipes up on the mobile app.

An example of a mobile search for “toothpaste” on Amazon shows a sponsored brand ad at the top of results.

Until recently, Amazon put two or three sponsored products at the top of search results. Now, there may be as many as six sponsored products that appear ahead of any organic results, with more promotions elsewhere on the page, said Juozas Kaziukenas, who runs e-commerce research firm Marketplace Pulse.

The number of ads that appear differs depending on the exact search term and other factors such as whether users are shopping on desktop, mobile or in the Amazon app, Amazon says.

While Amazon doesn’t break out advertising revenue, ads account for the majority of the company’s “other” sales. That category was the fastest-growing part of Amazon’s overall business in the second quarter, with revenue soaring 87% from a year earlier to more than $7.9 billion.

In 2018, Amazon leapfrogged Microsoft to become the third-largest ad platform in the U.S., trailing only Google and Facebook. Amazon is capitalizing on its market control, knowing that its website or app is where many consumers begin their online shopping journey.

Kaziukenas said Amazon and founder Jeff Bezos have completely transformed from being anti-advertising. It’s become such a lucrative business that ads “have replaced most of the functionality on the site,” he said.

An Amazon spokesperson said there are no dedicated ad slots within search results, meaning that a user may see one ad, multiple ads or none at all. The company said advertising is an optional service for brands and sellers, but that using it can improve visibility of their products.

“Like all retailers, we design our store to help customers easily find and discover the right brands and products, and sponsored ads is one of the many ways we do this,” the spokesperson said in an email. “In all cases we work back from the most useful customer experience and the relevance of the results surfaced, regardless of how they’re presented to the shopper.”

Big consumer products makers aren’t the only ones taking up the most valuable virtual real estate. Amazon is also populating search results with its own products. For example, a search for “shampoo” pulls up a promotion for a bottle of Amazon brand Solimo before ads for products from Pantene, Nexxus, L’Oreal and others.

Sponsored product ads accounted for roughly 73% of retailers’ ad spend on Amazon in the second quarter, according to digital marketing agency Merkle. Last year, Amazon began replacing product recommendations in listings with product ads.

Amazon has also added new ad formats like video ads and sponsored brands posts, which feature a single brand and several product listings in a banner at the top of the page.

Ad prices going up

For brand owners, the price of doing business on Amazon is surging as the company expands its dominance in online commerce.

The cost per click for Amazon search advertising was $1.27 in August, up from 86 cents a year ago, according to a survey of more than 300 Amazon sellers conducted by Canopy Management, an agency that helps manage businesses on Amazon.

Companies that don’t pay the toll are finding their listings buried in search results. At the same time, sellers are paying more overall to Amazon for things like transaction fees and fulfillment services.

“It’s not uncommon now for brands to be spending 50% or more of their product price on various fees to be selling on Amazon,” Kaziukenas said.

Competition has also intensified as a result of the rise of Amazon aggregators, venture-backed companies that are raising big money from outside investors to acquire independent sellers. Some smaller sellers are concerned they may not be able to compete against deep-pocketed aggregators, which are bringing “massive budgets to be spent on Amazon, also in the form of advertising,” Kaziukenas said.

“They’re going from competing against other, smaller sellers to now competing against massive and well-funded sellers,” he said.

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Drone startup Zipline hits 1 million deliveries, looks to restaurants as it continues to grow

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Drone startup Zipline hits 1 million deliveries, looks to restaurants as it continues to grow

Autonomous delivery drone startup Zipline said Friday that it hit its 1 millionth delivery to customers and that it’s eyeing restaurant partnerships in its next phase of growth.

The San Francisco-based startup designs, builds and operates autonomous delivery drones, working with clients that range from more than 4,700 hospitals, including the Cleveland Clinic, to major brands such as Walmart and GNC. It’s raised more than $500 million so far from investors including Sequoia Capital, a16z and Google Ventures. Zipline is also a CNBC Disruptor 50 company.

The company said its zero-emission drones have now flown more than 70 million autonomous commercial miles across four continents and delivered more than 10 million products.

The milestone 1 millionth delivery carried two bags of IV fluid from a Zipline distribution center in Ghana to a local health facility.

As the company continues to expand, it will bring on Panera Bread in Seattle, Memorial Hermann Health System in Houston, and Jet’s Pizza in Detroit.

Zipline CEO Keller Rinaudo Cliffton told CNBC that 70% of the company’s deliveries have happened in the past two years and, in the future, the goal is to do 1 million deliveries a day.

“The three areas where the incentive really makes the most sense today are health care, quick commerce and food, and those are the three main markets that we focus on,” Rinaudo Cliffton said. “Our goal is to work with really the best brands or the best institutions in each of those markets.”

The push into restaurant partnerships marks an “obvious transition” he said, due to the continuing growth in interest in instant food delivery. Zipline already delivers food from Walmart to customers.

“We need to start using vehicles that are light, fast, autonomous and zero-emission,” Rinaudo Cliffton said. “Delivering in this way is 10 times as fast, it’s less expensive … and relative to the traditional delivery apps that most restaurants will be working with, we triple the service radius, which means you actually [get] 10 times the number of customers who are reachable via instant delivery.”

Zipline deliveries for some Panera locations in Seattle are expected to begin next year, the Panera franchisee’s Chief Operating Officer Ron Bellamy told CNBC. Delivery continues to grow for its business, even in an inflationary environment, he said. Costs with Zipline are anticipated to be on par with what third-party delivery is now, he added, with the hope of that cost lowering over time. 

“I’m encouraged about it, not just even in terms of what I can do for the business, but as a consumer, I think at the end of the day, if it is economical, and it delivers a better overall experience, then the consumer will speak,” Bellamy said.

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Super Micro plunges as investors rotate out of red-hot AI stock ahead of earnings later this month

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Super Micro plunges as investors rotate out of red-hot AI stock ahead of earnings later this month

David Paul Morris | Bloomberg | Getty Images

Super Micro Computer shares plunged 18% on Friday as investors scaled back their holdings of one of the market’s hottest stocks ahead of earnings later this month.

Shares of Super Micro, which joined the S&P 500 in March, are still up about 168% this year after climbing 246% in 2023. The server and computer infrastructure company is a primary vendor for Nvidia, whose technology is the backbone for most of today’s powerful artificial intelligence models.

Super Micro said in a brief press release on Friday that it will report fiscal third-quarter results on April 30. The company broke from its pattern of providing preliminary results. In January, Super Micro increased its sales and earnings guidance 11 days before announcing second-quarter financials.

The stock is on pace for its steepest drop since Feb. 16, when it fell about 20%.

While Super Micro is getting a big boost from its ties to Nvidia, the market remains highly contested, with competitors including Dell and Hewlett Packard Enterprise planning to build systems using Nvidia’s latest generation of Blackwell graphics processing units.

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Dutch government says it may stop using Facebook over privacy concerns

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Dutch government says it may stop using Facebook over privacy concerns

Morning traffic outside Meta headquarters, in Mountain View, California, U.S. November 9, 2022.

Peter Dasilva | Reuters

The Dutch government said Friday that it may be forced to stop using Facebook after a warning from the Netherlands’ privacy regulator about the Meta-owned social media platform’s privacy risks.

The Dutch Data Protection Authority (DPA) issued a statement advising the Dutch Interior Ministry not to rely on Facebook pages to communicate with citizens if it doesn’t have a clear idea of how Facebook uses the personal data of people who visit government pages.

The Interior Ministry had previously asked the DPA to advise on whether the government could use Facebook pages in a compliant way.

The government wants clarity from Meta “as soon as possible, at the latest before the summer recess, on how they are addressing our concerns,” Alexandra van Huffelen, the Dutch Minister for Digitalization, said in a statement.

“Otherwise, in line with the advice of the DPA, we will be forced to stop our activities on Facebook pages,” she added.

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The Dutch DPA’s chairman, Aleid Wolfsen, said in a statement that “people who visit a government page trust that their personal and sensitive information is in safe hands.”

“The fact that this can also involve information about children and young people makes this even more important. They are vulnerable online and need extra protection,” Wolfsen said in the statement, which was translated to English via Google Translate.

A Meta spokesperson told CNBC: “We fundamentally disagree with the assessment that underpins this advice, which is wrong on the facts and demonstrates a fundamental misunderstanding as to how our products work.”

“We review all Meta products to ensure they comply with laws in the regions in which we offer our services, and will continue to engage with the Government to ensure they can use social media to communicate with people,” the Meta spokesperson added.

The DPA advice serves as further evidence of “growing distrust between European regulators and Meta,” Matthew Holman, a tech, privacy, and AI partner at law firm Cripps, told CNBC via email.

Holman said that the Dutch regulator’s concern is likely to be that user data “is shared with government departments on Meta’s platform and could still be subject to security issues, monitoring or access by US federal agencies.”

– CNBC’s April Roach contributed to this report

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