Advertising has emerged in recent years as a promising – and very profitable – opportunity for the e-commerce giant Amazon.com (NASDAQ: AMZN). According to eMarketer, the company's digital advertising platform has become the third largest in the US last year, slowly but surely beginning the duopoly of Facebook (NASDAQ: FB) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) Google subsidiary.
Amazon's advertising momentum will continue in 2019.
Reaching $ 11 billion earlier than expected
eMarketer has released new estimates on the growth of Amazon's advertising activities. He predicts that the company's advertising revenue will increase by more than 50% in 2019 to reach more than $ 11 billion. Amazon does not officially disclose its advertising revenues, but rather includes them in the "Other" category, which generated $ 10.1 billion last year. Advertising is the most important component of this segment.
eMarketer has raised its expectations following the release of fourth quarter results by Amazon, revealing a sustained momentum in the advertising sector. The market research had previously estimated that Amazon would reach $ 10.9 billion in ad sales in 2020. Amazon is expected to capture 9% of the US digital advertising market in 2019. We expect Facebook and Google see their combined market share decrease slightly, Advertising revenues increase in absolute dollars, driven by the growth of the wider market. According to the report, digital ad spending is expected to exceed traditional ad spend for the first time this year.
"Amazon has a major advantage for advertisers, especially for consumer products and consumer brands," said Monica Peart, eMarketer's Director of Forecasting.
The platform is rich in buyers' behavioral data for targeting and allows access to real-time purchase data. This type of access was previously only available through the distribution partner, to be shared at its discretion. But with Amazon's sponsored ad series, marketers have unprecedented access to "shelves" where consumers shop.
At Amazon's latest earnings call, Investor Relations Director Dave Fildes explained some of the steps Amazon has taken to grow its business:
Yeah yeah. I mean, we keep going – we are very focused on serving this set of customers. One of the things we try to do is continually evolve our tools and products to help this set of clients – agencies, advertisers – to ensure that they have a variety of ways to achieve their goals. Among the things we have done more recently in recent months, we have increased the number of sponsor brand placements, some have implemented new campaign reports and enhanced campaign manager functionality. So, there are a number of things beyond that. But the features available that will facilitate the growth of businesses with the advertising tools and advertising services that we offer. And we are always excited about this opportunity.
Once upon a time, former Google CEO Eric Schmidt had said that Amazon was the main competitor of the search giant. That's precisely why.
John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Suzanne Frey, an executive member of Alphabet, is a board member of The Motley Fool. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of CEO Mark Zuckerberg, is a board member of The Motley Fool. Evan Niu, CFA owns shares in Amazon and Facebook. The Motley Fool has stock and recommends Alphabet (A Shares), Alphabet (C Shares), Amazon and Facebook. Motley Fool has a disclosure policy.