The Amazon Effect   //   January 22, 2021

Why Amazon’s algorithm update takes direct aim at Walmart and Target

Amazon’s recent algorithm tweak signals the growing competition the e-commerce giant faces.

In the fall, Amazon rolled out its latest update to its product ranking algorithm, dubbed “A10.” The new rendition of the algorithm looked largely familiar: when considering how to rank and recommend products, Amazon, as before, put a lot of weight on sales history, conversion rate and seller history. But while the underlying variables stayed the same, the company played around with how much it weights each variable. In particular, Amazon’s new algorithm now prioritizes products that receive a significant share of its traffic from off of Amazon — meaning from blogs, Instagram, Linktree and so on.

That change might sound subtle, but it reflects the growing competition within the e-commerce market. As Target — and in particular Walmart — increasingly build up their e-commerce offerings, Amazon is trying to cling to its positioning in search engine results. Walmart and Target still represent only a fraction of the e-commerce market compared to Amazon, but both companies saw their digital sales more than double from the start of 2020 to the end, and that pace doesn’t seem to be letting up. When customers type “leopard print bedding” into Google, Amazon wants to ensure that an Amazon product — not a Walmart product — comes up first. Pushing its own sellers to prioritize referral traffic is one way to do that.

“When [customers] do Google searches for products, less and less Amazon products are showing up on the first page of results,” said Tanner Rankin, an Amazon consultant. “With Walmart very aggressively competing with them,” he went on, what Amazon needs to do is “ensure that they are not only top of mind but top of search everywhere.”

Both Amazon and Walmart depend heavily on search. About 26.8% of Amazon’s traffic comes from search engines, according to the analytics tracker SimilarWeb, while close to half — 43.8% — of Walmart’s web traffic comes from search. Boosting those numbers is a simple matter of boosting external links. Because most major search engines give significant weight to the number of referral links that drive people to a given page, one way for Amazon to ensure that its products rank highly in search results is to help those products get a lot of external traffic.

Mehmood Hanif, an Amazon seller who specializes in baby products and men’s fashion, said that he and other sellers are taking notice of the changes. Sellers are always paying attention to Amazon’s algorithm shifts, even small ones. “You should be smart enough to understand these signals as soon as possible and make the changes in your campaigns accordingly,” he said, adding that those who don’t take the changes seriously can see swift losses: “You will see many people in different Facebook groups who were doing business for years on Amazon and all of a sudden they collapse,” he said.

Hanif said he hasn’t encountered any issues with the new update — he is increasingly prioritize his work with influencers, most of whom are on Instagram, but he said the new weight Amazon is giving to outside traffic seems relatively minor so far.

Still, the algorithm update seems to be part of a larger effort by Amazon. Shortly before the algorithm change, Amazon rolled out Amazon Attribution, a tool that helps third-party sellers track the amount of off-Amazon traffic going to their listings. The company has also actively recruited more social media stars to join the Amazon Influencer Program, which integrates with most social platforms (minus, for now, TikTok) and gives influencers commissions between 1% and 10% on sales that they refer.

Rankin said that influencers will only continue to grow in importance over time. That’s because so much product discovery is moving to social channels like Instagram and TikTok — especially as Google de-prioritizes traffic to traditional product recommendation sites like Wirecutter. Getting its sellers to focus on social referrals is a win-win for Amazon: it means both that more people will discover Amazon products through new channels and that Google will rank those Amazon’s product listings over similar ones from Walmart.

When it comes to affiliate marketing, “Amazon is the king because they have just a head start,” said Rankin. “Back in 1996, they were the first to really lean into this.” Walmart does have an affiliate program of its own, though it is a drop in the bucket compared to what Amazon has built. About 6.6% of Amazon’s traffic comes from referrals, according to SimilarWeb, whereas just 2.8% of Walmart’s does. Walmart even suspended some of its affiliate partners last April.

“That’s changing because Walmart and also Target have been able to identify the fact that [so much] of Amazon’s traffic comes from affiliates,” said Rankin.