Written by Arianna McLimore and Greg Bensinger
(Reuters) – Amazon.com has begun rolling out a new artificial intelligence assistant aimed at addressing shoppers’ questions about products, but the feature raises as many questions as it answers.
Amazon says the software, known as Rufus, helps users by guiding them to the best toaster oven or dinosaur toy for their needs. But Amazon has a history of steering customers toward products that make the most money for Amazon, either because they’re more profitable or because they’re supported by advertising dollars.
Amazon claims the Seattle-based company operates a “pay-to-play” system that gives marketers the highest charge for the products they want to spend the most on. It is fighting an antitrust lawsuit brought by the Federal Trade Commission. The agency also noted that Amazon frequently pushes its private label brands to the top of search results, even when other products are higher quality and cheaper. The company denied the allegations and said it would fight the lawsuit in court.
Like other generative AI services, the algorithm behind Rufus is top secret, and Amazon declined to explain how it works. Several clues were obtained, including Amazon’s product catalog, reviews, information on the web, and press releases that say it is being trained using a question and answer section.
But Michael Pachter, an analyst at Wedbush Securities, said if Amazon doesn’t publicly release Rufus’ results to advertisers, it will be wasting money. “You’ll probably get sponsored results,” he says. “Advertising drives retail, and Amazon is no exception. Why do you think they make tens of billions of dollars a year from advertising?”
The company reported Thursday that ad revenue rose 27% to $14.7 billion in the fourth quarter of last year.
At least initially, Rufus doesn’t seem to be affected by advertising. Gil Luria, senior software analyst at DA Davidson, said that was likely necessary to build trust with consumers. “If you lose trust in the way they answer questions, you won’t ask them anymore,” Luria says.
Advertising and consumer choice
But the company has repeatedly allowed ads to creep into its recommendations. Consumers may have once believed that the “Amazon’s Choice” designation indicated a vetting and testing process, but Amazon once gave that badge to marketers who were willing to pay for it. . Margrethe Vestager, a European antitrust enforcement official, said Amazon’s ability to restrict access to the Amazon’s Choice label is one of the reasons she opposes the company’s planned acquisition of Roomba maker iRobot. Amazon withdrew from the partnership last month.
Amazon also previously allowed marketers to add products to customers’ online baby registries without their knowledge, a Wall Street Journal investigation found. Since then, the practice has ended.
According to research conducted by Profitero in 2020-2021, Amazon.com search results included an average of nine sponsored products, twice as many as Walmart and four times as many as Target. .
Jim Tierney, chief investment officer of concentrated U.S. growth stocks at AllianceBernstein, said there is real promise for Rufus “if you actually have some kind of AI conversational shopper.”
“That means more engagement and conversions, which means more revenue and (sold) units,” Tierney said.
But Amazon provided little guidance on rolling out Rufus to specific customers. CEO Andy Jassy said on a conference call with investors that Rufus “allows customers to discover products in a way they haven’t previously been able to find on an e-commerce website.”
In a blog post, Amazon showed how the software responds to questions about whether a particular pickleball paddle is worth it for beginners. “This paddle is a great option for beginners,” the software replied, according to the screenshot. “The wide sweet spot allows novice players to consistently send the ball over the net.” In another example, in response to a question about the best toy for “her 5-year-old who is obsessed with dinosaurs,” Tyrannosaurus Rex toy displayed.
The company said Rufus was trained using Amazon’s product catalog, reviews, web information, and question-and-answer sections.
No matter how Rufus evolves, Luria said Amazon has an advantage over AI applications from Google and Microsoft. That’s because Amazon has a wealth of highly advantageous purchase and personalized data at the checkout counter.
(Reporting by Arianna McLimore in New York and Greg Bensinger in San Francisco; Editing by Nick Zieminski)
