Amazon, the well-known online global retailer that announced 178 billion dollars revenue in 2017 (according Statista) is progressively establishing itself among advertising platforms. Amazon advertising might reach $50 billion in the next decade according to Citibank projections. From retail leader to advertising platform, Amazon is maturing its Ad Business and positioning as a challenger in the context of Google and Facebook Duopoly.
The consolidation in September 2018 of Amazon media services (Amazon media group, Amazon marketing services, Amazon advertising) under the name of “Amazon Advertising” is a clear signal of Amazon’s strong ambitions in terms of advertising, starting with facilitating the buy and management of campaigns.
To understand the potential of Amazon Advertising, let’s have a look at the below market figures: according eMarketer, on January 2018, 6 persons out of 10 declared using Amazon website when researching a brand, product or service instead of using a search engine. Advertising on Amazon comes up when people are looking among products to buy on the retail shop.
Understanding the power of its first-party data, Amazon developed many formats such as sponsored products (ads that appear in search results and on product pages), sponsored brands (possibility to add a logo and customised headline in ads that appear in search results), display ads (brand visibility on websites and apps, on and off Amazon), video ads (on Amazon sites) and customed ads (innovative customised advertising experience). Amazon even owns its DSP (Demand-side platform).
For a long period of time, organic was the key lever to sales on Amazon. Sales and positioning of products were based on positive reviews, good conversion rates. Today to benefit from the best positioning, brands need to pay. The increasing number of people that directly search for products on Amazon confirmed Amazon in its strategy to monetize advertising on its ecosystem.
Amazon entering in the advertising industry will definitely compete with the duopoly of Google and Facebook.
AMAZON’S POSITION AMONGST GOOGLE AND FACEBOOK
Amazon’s ad business remains small compared to Facebook and Google. According to eMarketer, Amazon’s market share in terms of US digital-ad spending in 2018 is only 4,1%, compared to the 57,7 % of Facebook and Google duopoly.
However, according to the same source, Amazon is experiencing a strong growth. Brands have spent $4.61 billion on Amazon ads in 2018, a 144,5% growth compared to 2017. By 2020, Amazon should weight for 7% of US digital ads investments overall.
Some key strategic advantages can explain this growth. Indeed, Amazon audience is huge and primed to buy. The main advantage of Amazon ad model compared to the duopoly of Google & Facebook is that it offers the opportunity to target customers based on their purchases and buying data, not just demographic and interests.
Shareen Pathak stated in Digiday “Google has search data and Facebook knows interest levels, but Amazon has real power because it knows what people are buying and how they’re doing it.”
However, this advantage might be reduced with the development and spread of Google Shopping. Also, we should keep in mind that, Amazon cannot compete in certain search segments. Amazon’s advantage is real for consumer goods sector, but very limited for insurance, banking or travel sector where the volume of requests on Amazon is too anecdotal to invest on.
WILL AMAZON CATCH UP WITH FACEBOOK AND GOOGLE?
Even if Amazon is experiencing a strong growth and have a serious advantage, it does not yet account for more than 5 to 7% of the online advertising market in the United States.
Amazon’s reporting tools are still limited contrary to Google and Facebook features. The platform only offers basic reporting interface. Amazon recently released a beta tool allowing advertisers to measure their impact on their online sales. With this tool being implemented, advertisers will have the opportunity to compare their results to other platforms, and this could have an effect on Amazon advertising market share.
Moreover, let’s keep in mind that for an advertiser, investing on Amazon Advertising to promote their products is not always an evidence. Some brands would rather invest their media spending to drive traffic on their own e-shop instead of driving traffic on Amazon. However, with the increasing number of people directly searching for the products they need on Amazon and not using Google anymore, it certainly cannot be ignored when thinking the digital advertising budget.