The Strategist

Amazon aims to lead US ads market


11/28/2018 - 08:43



For many years, two giants - Facebook and Google – have been ruling the American digital advertising market. Now they account for 61% of the cost of advertising companies in the United States. But a fierce struggle for the third place has been going on for a long time. Now, it is clear that the winner is Amazon. Moreover, according to analysts, the online retailer should become the new online ads giant.



Tony Webster via flickr
Tony Webster via flickr
Jeff Bezos, who founded Amazon in 1996 as an online book store, never stopped there. First, the retailer began selling audio CDs and video tapes. Then there appeared software and video games, electronics and furniture. Over time, it became possible to buy almost everything on the online retailer's website, and thanks to recent acquisitions of a world giant, even food and medical supplies are now available. Amazon has already conquered the online sales market both in the US and the world, ahead of the Chinese giants Jingdong and Alibaba in terms of revenue (in 2017). Now the company wants to take the next step, that is, to become a leader in the advertising market. And analysts are confident that the corporation can do it.

Now Amazon occupies the third place in the digital advertising market of the USA, being third only to Google and Facebook, the corporations that have long taken the lead in this sector.
Their total share accounts for 61% of all costs for digital advertising in the United States. For comparison, Amazon’s market share is only 4%. Nevertheless, the company has already begun to pursue an aggressive policy to expand its advertising business. According to forecasts of the research company eMarketer, Amazon’s revenue from advertising will double and reach $ 5.83 billion by the end of 2018. And Cowen & Co. believes that in five years this figure will be $ 28.4 billion. All global television companies cannot boast of such a rapid growth in advertising revenue, says the world's largest media investor GroupM. “I think that the giant has awakened,” said Bill Wise of Mediaocean.

Experts say that the main reason for the possible future success of Amazon lies in the very nature of the corporation. The lion's share of the company's advertising revenues falls directly on the store's website. Amazon merchants pay to be at the top of the list when searching for products on the site. In addition, Amazon provides the ability to advertise in video format during live sports events and even on the boxes in which the goods are delivered. But that's not all. Amazon helps companies advertise their brands on third-party sites. And in addition to this entire range of advertising space, the corporation has a huge customer base, thanks to which it knows not only what a particular person bought, but also what they wanted to buy, but never did. Finally, Amazon has Alexa voice assistant. Even Google and Facebook have nothing like this.

For now, Amazon’s own sales website and cloud-based business, which accounts for the majority of revenue, remain the main revenue sources for Amazon. But by 2021, according to the forecast of Piper Jaffray, advertising will come to the forefront for the company. And already then the company's share in the US advertising market will exceed 15%.

source: wsj.com




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