Amazon said Monday it’s testing a program that would enable the posting of third-party paid ads on web sites that drive traffic to the online retailer, indicating the company could be looking to get a piece of search giant Google’s online advertising action.

said Monday it’s testing a program that would enable the posting of third-party paid ads on web sites that drive traffic to the online retailer, indicating the company could be looking to get a piece of search giant Google’s online advertising action.

“Associates who choose to participate in the program will receive sponsored links from a third-party provider that they can place on their web sites alongside links to Amazon products,” Amazon spokesperson Drew Herdener said in an email.

The Seattle-based company’s Amazon Associates program pays webmasters to drive traffic to its site. In his email, Mr. Herdener said the sponsored links or ads would be based on keywords that appear on the sites of associates or on keywords the associates provided Amazon.

Analysts said the program could resemble Google’s AdSense, the company’s advertising program that serves up contextually relevant ads on the sites that have signed up to be part of its network. Advertisers buy the keywords from Google and the Mountain View, California-based search giant in turn pays the publishers of the sites that show those ads.

Google

“It does raise the question of a new PPC [pay-per-click] competitor entering the space, given Google’s tremendous success,” said Bear Sterns analyst Bob Peck in a research note.

Shares of Amazon dropped $0.38 to $37.95 at the close of trading.

The speculation about Amazon’s potential AdSense clone arose from the statements made by one of the members of the e-tailer’s associates program.

Chris Beasley, founder of a site called Website Publisher, who also runs blogs at Sitepoint, a site for web developers, said that Amazon contacted him last week asking if he wanted to be a beta tester with their new program.

He had originally assumed the program would pull up listings for Amazon’s products based on the content of web pages but realized later that the Amazon Associates representative was talking about ads.

“I asked if it [would be like AdSense], and they said ‘yes,’” said Mr. Beasley.

More Competition Possible

The online ad network business is highly lucrative. Piper Jaffray projects that online advertising will generate $55 billion by 2010. In the most recent quarter, Google’s AdSense program brought in $799 million, or 42 percent of total revenue. That compares with 57 percent of revenue generated by its own sites.

The online ad network business is highly lucrative. Piper Jaffray projects that online advertising will generate $55 billion by 2010. In the most recent quarter, Google’s AdSense program brought in $799 million, or 42 percent of total revenue. That compares with 57 percent of revenue generated by its own sites.

Analysts expressed concern that the Google network’s growth might be slowing in the face of competition from Yahoo and Microsoft’s MSN. Amazon’s program would potentially represent the fourth major player.

Yahoo

Amazon’s move could be tricky. Google currently powers Amazon’s search function and delivers sponsored links on its site according to a multiyear agreement the two signed in April 2003. On Google’s AdSense page, Amazon is one of the many partners mentioned.

But that could change this April if Amazon takes the program beyond its Associates program. Amazon has not identified the third party that’s providing links.

At this point, Amazon has not developed a timeline for the program, which it began testing on January 27.

“It would make sense for [Amazon] to cut the costs and keep the money themselves,” said Shawn Collins, chief executive of Shawn Collins Consulting, a firm that works with affiliate marketers.

of Shawn Collins Consulting, a firm that works with affiliate marketers.

But the big question is who will be powering the ads, according to Gary Stein, director of client services at BuzzMetrics, a research firm that tracks word-of-mouth marketing and consumer-produced media.

“If they’re just piping through someone else’s ads, there’s not a whole lot of value,” he said. “That’s just reselling ads.”

If the program does develop into something that resembles AdSense, it would mean more competition for Google—and that’s good news for publishers. Mr. Collins, who’s been with Amazon’s Associates Program since 1997, a year after it launched, is one of those who likes the idea.

“If Amazon jumps into this, Google’s got enough reason to be worried,” he said.