The company generated approximately $1.88 billion in global ad revenues for all of 2017. The latest forecast from research firm eMarketer lists Amazon’s 2018 U.S. ad revenue at $4.6 billion, representing extraordinary annual growth of 144.5%. The forecast puts Amazon ahead of Oath and Microsoft in eMarketer’s ad revenue ranking.
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A true triopoly may not be imminent (Amazon will only have 4.1% of ad market share in 2018 whereas Facebook will have 20.6% and Google will have 37%, according to eMarketer). But it’s a safe bet Amazon will soon sit comfortably in third place because of its unique advantages.
Here are three ways Amazon is likely to keep threatening the duopoly.
1) Amazon will steal search market share from Google
If you’re going to wind up on Amazon, why not start searching there instead of Google? That seems to be the rationale of more and more consumers.
“Amazon is fast becoming the “buyer’s search engine” and has all the incentive in the world to keep stealing search share from Google.”
Some 52% of shoppers begin product searches on Amazon, according to Raymond James Research. At the same time, Google’s market share is slipping, falling from 88% in 2011 to 78% in 2016. The main culprits, according to Forrester Research, are mobile search and Amazon. Forrester claims that consumers are 2.5 times more likely to find out about the brand of a recent purchase from Amazon than traditional search.
For advertisers, Amazon could be preferable because there’s a direct connection to sales. Much of Google’s searches are general interest and can’t be monetized. Amazon searches are done with the intent to buy something.
Amazon already has an ad platform in place to monetize product search ads, formerly known as AMS (Amazon Marketing Services) and now part of a broader naming structure, Amazon Advertising. Amazon is fast becoming the “buyer’s search engine” and has all the incentive in the world to keep stealing search share from Google.
2) Amazon will exploit its unique role as ad network and marketplace
The vast majority of Google and Facebook’s revenues come from advertising. That’s not true for Amazon, which makes money on the front end through advertising and again when the products in the ads are sold on Amazon.
More importantly, Amazon has first-party data on what consumers actually buy. Facebook and Google both put conversion pixels on advertiser’s websites that can track purchase activity. While this is certainly valuable, it pales in comparison to what Amazon has: unrestricted access to all the transaction and related search data from logged-in users on its own ecommerce site.
Not only can Amazon use this data to improve ad targeting, it can determine which products sell well, and then create its own Amazon version of that product (be it cargo shorts or belts or handbags), undercut the seller, and make money. The Duopoly can’t do this.
3) Amazon can expand Prime Video to outside advertisers
Consider another Amazon business: Amazon Prime. While Facebook and Google have tried to get streaming businesses off the ground, Amazon has a full-fledged streaming content empire. Amazon received 22 Emmy nominations this year with “The Marvelous Mrs. Maisel” winning four Emmys.
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The upside for this content is huge. There’s an opportunity at play for Amazon to open up the Prime Video platform to more advertising. Amazon doesn’t currently play commercials during Prime video content, but it is planning a free, ad-supported video service specifically for those who own the Fire Stick device. Google has its version of Fire (Chromecast) but the Fire has an arsenal of Amazon Prime content in its user interface it can advertise around. Google’s YouTube Red and Facebook Watch simply aren’t in the same league as Prime Video in terms of content volume and advertising opportunities.
For all the reasons above, Jeff Bezos and company will remain a consistent threat to the Facebook-Google duopoly and Amazon’s progress in advertising is likely to be the major industry story in the 2020s.