Amazon has increased the market share of its advertising business, beating expectations in an industry led by Google and Facebook.
EMarketer estimated Wednesday that the online retailer will have $4.61 billion in U.S. ad sales this year. This is 4.2 percent of the digital ad market.
Previously projected to be $2.89 billion EMarketer revised its estimates due to Amazon’s accounting change and increased demand.
Google and Facebook still rule the digital advertising companies. The two internet giants have a combined 58 percent of the $111 billion market, one percent less from 2017.
Amazon is closest to customers during purchase than Google and Facebook. This helps build brand recognition, said EMarketer analyst Monica Peart. The purchase data ties directly to the advertisement.
Amazon is an advertising haven for online sellers since many product searches start onsite, not on the ubiquitous Google Search. Most products sold on Amazon are sold by third-party sellers who pay the company a fee for each sale. The volume of products onsite and stiff competition from millions of sellers pushes them to spend on advertising.
The company’s marketplace is turning into a pay-to-play platform. Paid advertisers land the best placements.
The budding ad business has driven Amazon stock to new highs. Investors see it as more profitable than the company’s main e-commerce business. So far, its shares have surged 66 percent this year.
A new display ad offering
Amazon took its most assertive step into digital advertising when it released a display ad offering in May this year, at the expense of Google’s and Facebook’s multibillion-dollar revenue streams.
The tool lets sellers on the Amazon online marketplace buy ad placements or spots that follow shoppers on the internet and lure them back to Amazon to complete the purchase.
Merchants can buy other types of ads. And Amazon has offered better placement to sponsored product spots in its search result pages.
The new tool allows sellers to bid on ads that appear on other websites and apps. It expands their reach. And Amazon only charges merchants when customers click on the ads.
Amazon helps merchants target consumers who viewed their products or related offerings.
This web marketing across sites and apps is huge. The challenge is proving if the spots lead to authentic sales or purchases.
Amazon’s entry shows that the company is pushing hard on its new, yet fast-growing, ads business.
EMarketer estimates that advertising on websites and mobile devices will comprise half of ad spending in the U.S by 2021, having more market share than TV, radio, billboards, and newspapers combined.
Amazon’s ad business spawned a $1.7 billion revenue in 2017, EMarketer added. For the same period, Google took in $95 billion, while Facebook had $40 billion from ads.
Amazon is riding on its ads business to lift overall revenue. As mentioned, the company already charges sellers commissions per sale. And it also bills storage, packaging and delivery for those using its logistics services. The new tool charges merchants to drive traffic to their listings on the marketplace.
Analysts are supportive of Amazon’s push on ads since it has more power to pull revenue than only selling things online. Amazon is ideal for advertising since shoppers actually shop, unlike on Google and Facebook, where they prefer to browse only.