The Next Great Digital Advantage

Of the 4,000 products Amazon sells every minute, approximately 50% are presented to customers by its personalized recommendation engine. When you visit the site, its algorithms select an assortment of products from about 353 million items and arrange them for you according to what they predict you will want at that precise moment. These recommendations are powered by Amazon’s ever-evolving purchase graph, which is a digital representation of real-world “entities”—anything about which it stores information, such as customers, products, purchases, events, and places—and the relationships and interrelationships among them. Amazon’s purchase graph connects purchase history with browsing data on the site, viewing data on Prime Video, listening data on Amazon Music, and data from Alexa-enabled devices. Its algorithms use collaborative filtering—incorporating factors such as diversity (how dissimilar the recommended items are); serendipity (how surprising they are); and novelty (how new they are)—to generate some of the most sophisticated recommendations on the planet. Thanks to its rich data and industry-leading personalization, Amazon now owns 40% of the U.S. e-commerce market; its closest rival, Walmart, has a market share of only 7%.