Amazon advertising is fairly new, but Jeff Bezos has been planning its growth since the online bookstore launched. Bezos consistently favors growth over profit, and for good reason. Insecure investors are now beginning to see how the money they’ve poured in is going to bear fruit. Amazon.com Inc. now has a massive logistics network and a reputation for customer satisfaction that has drawn to itself a huge slice of the online shopper population. With that foundation 20 years in the making, the online giant is ready to turn its downward trend of profit margins around.
New developments in Amazon advertising have been in the works since December of 2017. Amazon’s marketing platform is now ready to feed the company much needed revenue, care of its enormous customer base.
Amazon Advertising Today
Amazon is not known as a digital advertising company. Still, it ranks fifth on the list of digital revenue generators in the US with an estimated 1.65 billion dollars net for 2017. Way behind digital giants Google and Facebook but ahead of Twitter, Amazon is in a great place to activate strategies that were decades in the making. Amazon advertising revenues have been growing far more quickly than established ad companies over the past year, around 48%. eMarketer estimates that in two years, the online retail king with have surpassed the 3 billion mark in ad revenue, which equates to 3% of US digital ad spending.
For 2017, about 25% of Amazon Advertising revenue was from search placements. This places the company just under Yelp with a little over 1% of US search ad spending. In terms of digital display, Amazon is perhaps the largest US demand-side platform. With a large share of the market, this will earn the company fourth place with 3% of net revenues.
Amazon got into the cloud services gig a few years back, which balanced off the company’s losses. Now, having already put in the investment for data centers – not to mention its massively coordinated shipping hubs – Amazon advertising is easy money. Amazon shares already jumped past $1,300 to a $1,600 price target due to growth in the Amazon advertising platform. If Amazon advertising can push that to $2000, it will be the first company to reach a market value of 1 trillion US dollars.
Amazon advertising is going to be more profitable than the company’s cloud component. Easing into the business over the years has proved to be a wise decision as shoppers have become accustomed to sponsored products rather than being disappointed by aggressive selling tactics. The marketplace now hosts hundreds of millions of products, not to mention the streaming service that brings in even more happy, trusting shoppers. With all that data and about 180 million monthly hits from the US, Amazon is bypassing search engines.
In 3 years, online advertising could take a half share of the country’s total ad spending. Amazon advertising is in place to capture a nice slice of that share as it climbs up the ranks towards 35 billion dollar winner Google. Amazon advertising has been nurtured as a platform that offers a target-rich space – an audience focused on buying, unlike Google’s much more mixed audience. As such, the company has built a sure winner. Demographic targeting will be keener than what the robust Facebook advertising platform offers. Real-time marketing campaign insights will be great. Ads will be at very bottom of the sales funnel. There is no better place to be.
Amazon advertising, as huge as it promises to be, is by no means going to limit itself to the onlinemarketplace. The now well-known display ads and sponsored search results will expand outward into the broader online space. Amazon is molding its image from a place to shop into a lifestyle media brand. Amazon advertising will become the path to the company’s evolution into a major influencer of purchasing decisions – the billboard of online shopping, if you will. The potential for generating sales beyond the platform is as yet unmeasured, but Amazon is working on this, too.
Amazon advertising could be not just the future of advertising both online and offline, but an actual paradigm shift in the industry. It could destroy and remake everything we know about advertising and how it actually functions to produce sales.
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