Amazon En Route to Becoming an Online Advertising Giant
In stock trading, it is always important to look out for the rising stars in a particular area of business. Now Amazon is rising in the field of online advertising, and could soon become a force to reckon with.
Amazon Could Soon Be the Third Largest Online Advertiser
Amazon ($AMZN) is on its way to become America's third largest Internet advertiser, surpassing Oath by Verizon ($VZ) and Microsoft ($MSFT), says eMarketer. According to the firm, the company's advertising business in the US would generate revenue worth $4.6 billion this year, which gives it a market share of 4.1%. Mobile ads would make $1.6 billion of that annual revenue, and that would provide Amazon with a 2.1% helping of the mobile ad market in the US.
According to the eMarketer report, mentioned in this Nasdaq article, Alphabet ($GOOG, $GOOGL) would control 37.1% of the market while Facebook ($FB) would have a 20.6% share. These two would continue to dominate the online advertising market. By 2020 though, the combined share of these giants is expected to slip down to 55.9% from 57.7%, while Amazon's share would increase to 7%.
Amazon's Tremendous Online Ad Growth Surprises Many
That shows Amazon is making amazing progress in online advertising, way more than investors had expected. It was always thought that most of Amazon's income came from ecommerce and cloud services. It shows Amazon is diversifying too, to ensure a steady flow of income despite changing consumer trends. It shows that this advertising business could really be Amazon's new source of growth.
Amazon's Ad Departments
So let's break down this advertising business of Amazon. Amazon Advertising, as the company calls it, is actually a merger of Amazon's three marketing divisions - Amazon Media Group (AMG), Amazon Advertising Platform (AAP) and Amazon Marketing Services (AMS). The merger happened in the early part of September, but the functioning of these divisions is still distinct.
AMG takes care of displaying ads through the Amazon marketplace, other websites and devices such as the Fire TV and Kindle. AMS ads are only shown for products that are sold on Amazon. AMS is basically a pay-per-click service that enables vendors to boost sales through sponsored product placements, product display ads, sponsored brand ads and also custom Amazon Stories. AAP is an advertising platform for AMS and provides self-serve marketing campaigns or those assisted by the team.
Much More Potential for Growth
With the Amazon websites attracting close to 200 million unique visitors each month in the US (2017 figures as per comScore research), and Amazon Prime boasting almost 100 million members (according to CIRP research), it isn't hard to see why Amazon is becoming an advertising hotbed. Fire TV is America's second most popular streaming device while the Echo is still the top smart speaker.
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