Amazon is blocking ads for unprofitable products

Joshua Roberts | Reuters

Jeff Bezos, president and CEO of Amazon and owner of The Washington Post, speaks at the Economic Club of Washington DC’s “Milestone Celebration Dinner” in Washington, U.S., September 13, 2018.

As Amazon steps up its effort to show Wall Street it can generate profits, the e-commerce giant is aggressively blocking money-losing products from advertising on its site.

In recent months, Amazon has been telling more vendors, or brand owners who sell their goods wholesale, that if Amazon can’t sell those products to consumers at a profit, it won’t let them pay to promote the items. For example, if a $5 water bottle costs Amazon that amount to store, pack and ship, the maker of the water bottle won’t be allowed to advertise it.

The added stringency, which CNBC learned of from conversations with vendors and emails they received from Amazon as well as from outside experts, reflects a broader push to squeeze earnings out of a historically low-margin business. In its most recent quarter, Amazon posted $3 billion in net income, the highest in company history, while profit for the full year more than more than tripled to $10 billion.

To that end, Amazon is exerting greater control over its platform, pressuring brands to lower their prices if they want to advertise.

“Amazon is trying to be much more profitable than they were in the past,” said Joe Hansen, CEO of Buy Box Experts, a firm that helps companies sell on Amazon. “But this policy shows there’s bias in Amazon’s ad service, even though it says it’s an open advertising platform.”

It’s one of many recent moves Amazon has made to bolster its bottom line. The company also announced the closure of its 87 pop-up stores and introduced “Amazon Day,” a service that reduces Amazon’s shipping costs by allowing customers to get all of their orders throughout the week on one specific day. Amazon also abruptly stopped ordering products from smaller brands earlier this month, according to Bloomberg, a move seen as a way to push brands to the third-party marketplace, where Amazon makes money from storage and shipping fees.