Amazon's New AI Assistant Rufus Sparks Debate - Will It Impact Advertising Revenue?

Amazon.com Inc AMZN has introduced a new artificial intelligence assistant, Rufus, to assist shoppers with product-related questions. 

Rufus will likely guide users to products that best suit their needs. However, this move raises concerns about Amazon’s history of promoting products that benefit the company due to higher profitability or advertising support. 

Amazon is currently facing an antitrust lawsuit from the Federal Trade Commission (FTC), which alleges a “pay-to-play” system where products from marketers who spend the most on advertising get top billing, Reuters reports.

Rufus operates using a closely guarded algorithm trained on Amazon’s product catalog, reviews, web data, and question-and-answer sections. 

While the company has not disclosed how Rufus operates, there are concerns that it may introduce sponsored results in the future to generate advertising revenue.

Despite Amazon’s significant advertising income, Rufus does not appear to be influenced by advertising initially. 

This is likely an effort to build trust with consumers and provide unbiased product recommendations. 

Amazon has faced scrutiny for allowing advertising to impact its recommendations, including the “Amazon’s Choice” designation previously granted to marketers who paid for it.

Analysts and experts have varying opinions on Amazon’s new artificial intelligence assistant, Rufus, and its potential impact on the company’s operations.

Michael Pachter, an analyst at Wedbush Securities, believes that Amazon is likely to introduce sponsored results through Rufus to generate advertising revenue. 

He points out that advertising plays a significant role in driving retail, and Amazon’s substantial advertising income reflects this trend.

On the other hand, Gil Luria, a senior software analyst at D.A. Davidson, suggests that initially, Rufus may not be influenced by advertising. This approach is likely an attempt to build trust with consumers. 

Luria emphasizes the importance of maintaining consumer trust in Rufus’s responses to ensure continued usage.

CEO Andy Jassy had previously emphasized the transformative potential of generative AI in enhancing customer experiences across Amazon’s enterprise and consumer businesses. 

In 2023, Amazon Web Services (AWS) launched generative AI in Amazon Connect, its cloud-based contact center, to improve customer service with AI-assisted responses and analytics.

Last year at AWS re: Invent 2023, CEO Adam Selipsky flagged AWS’s advancements in generative AI, particularly the Bedrock platform. AWS introduced the Trainium 2 chip for training large-scale AI models and the energy-efficient Graviton 4 chip.

Price Action: AMZN was down 1.48% to $169.26 on the last check Monday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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