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The Trade Desk has a target on its back — shaped like an Amazon logo.

Earlier this month, The Trade Desk’s stock cratered almost 40%, with analysts blaming intensifying competition from Amazon and uncertainty about whether Wall Street’s once-favorite adtech darling could fight back.

It was The Trade Desk’s largest-ever one-day stock decline. But behind the scenes, Amazon’s gut punch had been building for years.

In 2022, Amazon’s advertising unit set a big, hairy goal: Overtake Google and The Trade Desk to operate the world’s No. 1 demand-side platform. A demand-side platform, or DSP, is a sophisticated piece of adtech software that allows advertisers to automate their ad buys and target audiences across a range of websites, apps, and other platforms like TV.

Google is the world’s biggest advertising player, which means The Trade Desk was the most immediate in Amazon’s line of sight.

At that time, Amazon had already cemented itself as a major advertising player. A year earlier, it brought in $31 billion in ad revenue, behind only Google and Meta, as the third-biggest digital ad seller worldwide. Its ad business was fueled primarily by Amazon sellers jockeying for prime real estate as shoppers search Amazon.com for diapers and dog food. Beyond search, it brought ads to all corners of Amazon — from its delivery packaging to its “Thursday Night Football” telecasts and within its Whole Foods stores — attracting endemic (brands that sell on Amazon) and non-endemic advertisers alike.

Amazon knew there was a bigger opportunity to apply its valuable trove of shopping data beyond its own walls to the wider internet of sites and platforms it doesn’t own. But while the Amazon DSP had existed in some form for more than a decade, the tech was clunky, and it hadn’t been a priority internally.

Amazon’s DSP is now a far more important part of its advertising arsenal, thanks to a series of strategic moves. Amazon made a raft of high-profile hires from companies like Google, Meta, and Roku. The team fixed bugs and helped connect the DSP with other important pieces of tech, like the Amazon Marketing Cloud, which had previously been siloed. It aggressively undercut competitors on fees. And it opened up the TV advertising floodgates by bringing ads to Amazon Prime Video — exclusive inventory competitor DSPs don’t have access to — and signing big partnership deals with Disney and Roku.

The strategy appears to be working.

At its peak in 2024, The Trade Desk had a market cap of around $69 billion. It’s now trading at around $25 billion, despite posting 19% year-on-year quarterly revenue growth. Meanwhile, Google’s adtech business’s growth has been hobbled by two recent antitrust rulings that could soon force it to divest assets like its Chrome browser and ad exchange or agree to other remedies.

Current and former Amazon staffers, ad buyers, and other industry insiders said they think Amazon’s quest for global DSP domination is only just getting underway. Once considered a sleeping giant of the ad business, Amazon’s advertising services segment — of which the DSP plays a small role — accounted for its largest-ever share (9.36%) of the company’s total revenue in its most recent quarter, and grew by 23% versus last year.

“We see them gaining tremendous share in the adtech universe since few companies in the world can replicate their value proposition at this point,” said Ashwin Navin, CEO of Samba TV, a TV analytics company.

Amazon and Google declined to comment. The Trade Desk didn’t respond to requests for comment.

Filling the bench with adtech all-stars

Amazon began laying the groundwork for its big DSP play in 2021. Over 18 months, it hired key players who had helped build some of the most important architectural pieces in adtech history.

The bolstered DSP crew set about reengineering Amazon’s ad buying tech to better meet the needs of advertisers, who had become accustomed to the slick interfaces of Google’s DV360 and The Trade Desk.

The feedback from agency ad buyers on Amazon’s DSP compared to The Trade Desk and Google was “wow, this is complicated and too hard,” said Brian O’Kelley, the adtech veteran who founded AppNexus and now runs the adtech startup Scope3. The system was buggy, and there often weren’t sufficient media quality controls, O’Kelley said. But over time, Amazon began to fix these, he added.

Analysts at Lightshed Partners said this month that while it previously took brands upward of 75 clicks to set up a campaign within Amazon’s DSP, it now takes just 4.

Amazon is famed for operating the “two-pizza rule” — teams small enough to be fed by two pizzas — dedicated to certain projects. It’s a concept designed to speed up efficiency and ward off needless bureaucracy. But Amazon’s new adtech brain trust found that this sometimes hindered the DSP. Teams that worked on improving the DSP’s ability to win bids in advertising auctions needed to better align with the teams tasked with improving the value of Amazon’s audience data, for example.

A big leap forward was Amazon’s work to better link its DSP with Amazon Marketing Cloud, a move advertising insiders said began to take shape around 18 months ago. Launched for use by all advertisers in 2021, AMC is what’s known as a data clean room. That means it connects the dots between Amazon’s data and a brand’s data to help give advertisers a clearer picture of how their campaigns are driving sales.

Advertisers in the US can target more than 8,000 different audience segments using the DSP, said Daniel Wallis, CEO of VOW, an Amazon Ads partner that helps mid-market brands run campaigns on the Amazon DSP. Amazon Marketing Cloud can help filter that pool down to find people who have added a product to their cart but didn’t purchase it, and identify new audiences based on an individual customer’s data and the advertiser’s campaign objectives.

“That is untouchable,” Wallis said. “AMC is a massive, massive, massive, massive win for Amazon, and it’s only just starting.”

Big on partnerships, low on fees

Amazon used to keep a low profile at major industry events like Cannes Lions, the big advertising schmoozefest held in the south of France each June. But it notably upped its presence over the past three years, building a massive “port” to host meetings, panels, and concerts to woo ad buyers.

This year, the DSP team boasted big new partnerships with Roku and Disney. These allow advertisers to reach tens of millions of streaming TV viewers in the US, and use Amazon’s data to target specific audiences and measure whether campaigns are driving sales.

The deals bolstered Amazon’s already solid position selling ads on smart TVs, which was kicked off by its decision last year to switch on ads by default for all Prime Video users. Morgan Stanley analysts predicted in July that Prime Video would overtake YouTube to become the leading seller of ads on smart TVs in the US by 2027.

Amazon Prime Video’s entrance on the advertising scene upended the ad-supported streaming landscape. Its competitive ad prices forced other platforms like Netflix to lower their CPMs, the cost to buy a thousand impressions.

The fees Amazon charges advertisers to use its DSP are also turning heads.

Amazon’s DSP fees tend to fall between 4% and 8% on average, according to seven ad buyers and other insiders with direct knowledge. Fees can vary depending on how much a particular agency or advertiser is spending. In some cases, Amazon’s DSP free can even drop as low as 1% or free, some of those people said.

Even at the upper end, Amazon still undercuts the industry average DSP platform fee, which often falls more in the 10% to 20% range, buyers said.

“Clients and agencies are under significant amounts of pressure, and I think Amazon identifies an opportunity,” said Rhys Williams, managing partner of the media agency The7Stars. “Who else has the clout to make the investments and then who can afford, on the flipside, to undercut the rest of the market?”

Will Amazon force a rethink from The Trade Desk?

While there isn’t an available resource that denotes DSP market share, the advertising insiders interviewed for this article estimated that Amazon had quickly gained ground.

Not that The Trade Desk’s founder and CEO, Jeff Green, will concede that.

“Amazon is not a competitor and Google really isn’t much of a competitor anymore either,” Green said on The Trade Desk’s August earnings call. “We’re trying to buy the open internet, leveraging technology that values media objectively. We don’t have any media, and we don’t grade our own homework.”

But traffic on the open web is declining, thanks in part to the rise of AI features that reduce the need for users to visit websites. Advertisers are looking for adtech partners that can provide them with unique audiences and demonstrable results. Amazon conveniently has it all under one roof.

For years, Green has built a narrative around The Trade Desk’s independence, positioning his company as the antidote to the “walled gardens” of Big Tech that are incentivized to direct advertiser dollars to their own platforms rather than the rest of the internet. O’Kelley said the rise of Amazon’s rounded offering could force The Trade Desk to rethink that strategy, and perhaps consider acquiring media and data companies in order to better compete.

Right now, “The Trade Desk isn’t even playing in the same ballgame,” O’Kelley said.

Additional reporting by Lucia Moses.