Amazon apologizes after its AI advertising system makes costly error

Amazon apologized to advertisers after its automated advertising system charged them to promote products they couldn’t sell.

The retail giant confirmed that some sellers have been charged for misdirected ads, and assured that it was actively working to resolve the issue.

First spotted. Rob Robinson, a seller of advanced gaming computers, was the first to raise concerns after discovering he was being charged thousands of dollars to promote products in California, despite not selling in that region. He alleged that the retailer’s automated advertising system continued to serve ads in California even though customers couldn’t purchase the merchandise, resulting in him making zero profit from November 2023 to January 2024.

Aftermath. Robinson believes that the misplaced ads hurt his “conversion rate,” an important metric for Amazon’s algorithm to decide how popular a product is and where it appears in search results. He noticed that his sales dropped at the same time as the advertising problem.

Amazon’s response. Initially denying the allegations, the retailer later apologized and offered Robinson a £15,000 refund, despite the error costing him in the region of £300,000. Amazon then added that the issues had “affected a tiny fraction” of sellers, and that it would be contacting affected sellers to issue refunds.

What Amazon is saying. An Amazon spokesperson told Bloomberg:

• “We will contact and refund any affected sellers, and are updating our processes to ensure any such ads are not charged going forward.”

Why we care. If you were impacted by this issue, contact Amazon see if you can get a refund. But beware, if you were one of the affected advertisers, it seems unlikely that Amazon will fully cover your financial losses.