E-commerce giant Amazon (AMZN) is testing a new type of ad that’s built into its chatbot, Rufus, according to The Information. While OpenAI has also been experimenting with ads in ChatGPT, Amazon’s version works differently by suggesting pre-written prompts that start a shopping conversation. For example, a user searching for a product might see a suggested question about a specific brand that they can click to start chatting. However, even though the idea is gaining attention, early results show that these ads are still seeing very low engagement compared to traditional Amazon ads.
Claim 30% Off TipRanks
Forget margin or options. Here's how the pros trade AMZNFor instance, one seller reported only 88 clicks from these chatbot ads this year, compared to around 500,000 clicks from regular Amazon ads over the same period. Overall, these “sponsored prompts” make up less than 1% of total clicks in some campaigns, according to marketing agencies. Still, there are some positives. These ads are cheaper, with costs per click around $0.31 compared to $0.50 to $0.70 for traditional ads, and they provide more detailed data. As a result, marketers are using them to better understand how Amazon’s AI recommends products and what shoppers are actually searching for.
It’s also worth noting that this slow start is not unusual for a new type of advertising. Marketers are still figuring out how chatbot ads should work, especially as more shoppers begin using AI tools for product discovery. However, there are still concerns. For example, advertisers have limited control over the prompts, cannot always see the full chatbot responses, and are unsure what triggers these ads to appear.
Is Amazon a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on AMZN stock based on 42 Buys and three Holds assigned in the past three months, as indicated by the graphic below. Furthermore, the average AMZN price target of $284.30 per share implies 33.5% upside potential.
