Amazon Is Grabbing Google's Online Advertising Share: FT

Amazon.com, Inc AMZN is on course for $100 billion in quarterly revenue as the pandemic has led to an online shopping surge, the Financial Times reports.

As shoppers have flocked online, Amazon has also seen a boost in advertising revenue. According to FactSet, the e-tailer is on track to post $21 billion revenue from the "other" unit in 2020, FT noted.

What Happened: The “other” unit mostly comprises Amazon’s ads business. Expected revenue of $21 billion puts Amazon’s “other” unit on track for 47% year-over-year growth, which will surpass growth from retail, cloud computing, and Prime subscription divisions.

“I don’t think there’s enough recognition for just how big of an advertising business Amazon is on the way to creating,” said Andrew Lipsman, principal analyst at eMarketer.

Lipsman said — while he expects Alphabet Inc’s GOOG GOOGL Google ad business to see substantial growth in 2020 and 2021 — Amazon is “eating into that growth.”

FT notes that Amazon offers advertisers irresistible data that not only shows consumers' web browsing habits but actual buying habits. The e-commerce giant has two decades of insights on how consumers spend, and it gives advertisers better value for every dollar spent.

Why It Matters: “I can understand better the value of $1 spent on Amazon because I can literally see the transaction,” said Eric Heller, who runs the Amazon Center of Excellence at WPP.

Heller tells FT that several studies have shown that consumers are searching for things to buy directly on Amazon, rather than on Google. It becomes easier for marketers to target a person searching for “athlete’s foot cream” rather than “why does my foot hurt?”

As per FT, Amazon allows advertisers to bid to gain prominent spots as “sponsored” listings at the top of product search results, helping them capture the attention of more than 200 million unique visitors to its sites every month.

Many argue that Amazon’s sponsored results are like “listings tax,” which is an additional cost of doing business on top of the commission the group already takes. Amazon made $20 billion from the commission in the last quarter.

Price Action: AMZN shares closed 3.51% higher at $3,283.96 on Monday.

Photo via Wikimedia