[ad_1]
Amazon (AMZN) underperformed the market in 2019 and has gained just over 18% since the beginning of the year. Comparatively, the S & P 500 index is up 20% this year. AMZN's shares have been affected by the general weakness of the market, combined with the recent privacy concerns of large technology companies.
Although the less impressive results of the second quarter did not help, Amazon remains a solid bet in the long run. As the world's largest e-commerce company, Amazon is also leading the cloud computing segment and is now looking to increase its long-term advertising revenue.
AMZN's advertising revenue has increased by more than 100% in 2018
Although Amazon does not allocate its ad revenue, Adweek estimates $ 10.1 billion in advertising sales for 2018. This represents a year-over-year growth of 117%, compared to $ 4.6 billion in advertising revenue. dollars in 2017.
Google (GOOG) (GOOGL) has been and remains the leader in online advertising sales. Social media giant Facebook (FB) has entered the fray and competition is growing with Amazon's excellent advertising revenue growth.
According to the Forrester report of Sept. 3, Amazon's ad sales have increased because "endemic advertisers (brands that sell products and buy ads on Amazon) have dramatically increased their Amazon ad budgets in the last two years. And non-endemic advertisers (brands that do not sell products on Amazon but buy ads with the help of the stack of Amazon ads) find it interesting to use the rich behavioral and business data. Amazon's purchase for more detailed targeting of ads. "
Ad spending by endemic and non-endemic advertisers on the AMZN platform is expected to grow at a sustained pace. The Forrester report also noted that Amazon is rapidly gaining popularity with CPG (Consumer Staples) brands.
Forrester added that AMZN had tied many networks with advertising agencies. Now, these agencies can very well diversify customer spend on the Amazon platform instead of allocating significant resources to Google and Facebook.
Increase profit margins
Advertising revenue growth should not only be a key factor in Amazon's sales, it should also help improve profitability. Although Amazon's profit margins are solely dependent on its cloud business, advertising could also help it increase its bottom line.
While AMZN posted a 5.3% operating margin in 2018, Google and Facebook reported operating margins of 19.2% and 44.6%, respectively.
Partnership with the Trade Desk
Among the AMZN's advertising products, Display Ads allows brands to showcase their products on multiple Amazon platforms. Video and custom ads help build brand awareness and personalization. Amazon's DSP platform provides a variety of tools to purchase ad placements.
In July 2019, AMZN announced a partnership with The Trade Desk (TTD). On August 6, Motley Fool announced that Amazon "would sell an inventory of third-party TV content ads via the Amazon Fire TV device."
TTD is a technology company that provides customers with a platform to manage digital marketing campaigns. The TTD platform allows customers to purchase digital advertising space and use third-party data to optimize these marketing campaigns. It also provides customers with details about their target audience and their scope, among others.
With this agreement, the Trade Desk hopes to gain ground in the ad space for connected TV, while Amazon would have access to a wider customer base. The connected TV market is expected to grow rapidly, benefiting both parties for years to come.
According to eMarketer, the digital advertising market in the United States is expected to grow 19% to $ 129.3 billion in 2019. Traditional advertising spending is expected to fall 19% to $ 109.5 billion this year . Notably, digital advertising spending is expected to reach $ 151.29 billion in 2020 and $ 172.29 billion in 2021.
Expanding market opportunities provide AMZN with enough room to increase ad sales at a steady pace. We plan to determine how much time Amazon needs to challenge Google and Facebook in this market.
Source link
