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Amazon Does to Advertising What It Did to Retail
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Amazon.com Inc. (NASDAQ: AMZN) has upended the entire retail industry over the past several years, and in the process has wounded or been partially responsible for the death of many retailers. It has now entered into the online ad business with a vengeance and become among the largest players in this industry, and it has done so in a remarkably short time.
Marketing research firm eMarketer reports that Amazon’s market share in online advertising has put it into the number three spot among all companies in the industry:
US digital ad revenues at Amazon will more than double this year, eMarketer estimates, moving it up the ranks past Oath and Microsoft to take the No. 3 position behind Facebook and Google.
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US advertisers will spend $4.61 billion on Amazon’s platform this year, accounting for 4.1% of all digital ad spending in the country. It’s important to note that much of that growth is thanks to an accounting change Amazon made that affected estimates for 2018 and later, leading to the growth spike this year.
Its move into advertising does have some limitations as it goes up against the industry’s two leaders:
For more than a year now there’s been a steady murmur about Amazon’s encroachment on the territory of the Facebook-Google duopoly. This year, 57.7% of US digital ad spending will go to one of those two platforms. Amazon may be in third place, but 4.1% is far behind Facebook’s 20.6% or Google’s 37.1% of market share. In 2020, Amazon’s 7.0% share will compare with Facebook’s 20.8% and Google’s 35.1% of US digital ad spending. So while the gap may be narrowing, the duopoly pillar still stands.
Amazon’s ability to enter an industry and dominate it has been underestimated before. The company has more than successfully entered the streaming media business, consumer electronics and most recently the virtual digital assistant business with its Alexa-powered devices.
While online advertising has grown rapidly for over a decade, its expansion has dropped to the high single digits, according to research from global consultancy PwC. If Amazon continues to take share and Google and Facebook hold most of theirs, many other companies that rely on the industry will come under terrible pressure. The online advertising industry faces some of the risks that retail did as Amazon became a bigger threat year after year.
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