Amazon’s ad business is growing faster than Google’s and Facebook’s, although the duopoly still dominates
Amazon is on top of every marketer’s mind today. Google and Facebook combined still represent more than half of the U.S. advertising market, but Amazon’s ad business, while just 2.5 percent, is growing faster than both of them, according to speakers at AdExchanger’s Industry Preview in New York City.
Scott Galloway, founder of consultancy L2, predicts that digital ad revenue for Amazon Media Group, Amazon’s in-house team that sells ad products, will grow more than 40 percent year-over-year. That’s faster than Facebook, which is poised to grow about 25 percent; and Google, about 15 percent, Galloway said in his presentation on Jan. 17.
Galloway, a marketing professor at New York University’s Stern School of Business, said Amazon has aggressively hired marketing talent from top universities over the past year or so. “One in eight kids in my class goes to work for Amazon,” Galloway said.
Another presenter, Geoff Ramsey, co-founder and chief innovation officer for eMarketer, also discussed Amazon’s growth. Ramsey said that although the duopoly accounts for more than 65 percent of U.S. ad spend, compared to 2.5 percent from Amazon, Amazon was the second-fastest growing advertising company last year, second only to Snapchat. Ramsey estimated that this year, Amazon’s advertising business will increase by 42 percent compared to a year prior. He didn’t give baselines.
“Facebook and Google are also under increasing pressure to clean up their acts,” said Ramsey. “Brands want to be in a safe environment. Trust is becoming a real issue [for Facebook and Google] in light of activities like fake news.”
Amazon’s consumer-obsessed culture has helped it win advertisers, Seth Dallaire, vp of global advertising sales and marketing for AMG, said during a fireside chat. And Amazon’s growth in advertising can also be attributed to advertisers gradually adopting e-commerce as a marketing discipline, he said.
“Two years ago, we oftentimes had to explain why we had an advertising business,” Dallaire said on stage. “But now, we go beyond that, and the tenor of the [client] conversation is more urgent, centered on how advertising on Amazon works. Holding companies are looking to build capacity in data interpretation and e-commerce marketing, while boutique agencies are very focused on search and programmatic display [on Amazon].”
One reason behind Amazon’s growing ad business is that with AMG, it requires clients to spend a minimum amount on some ad products. One product has a threshold of $100,000, for example. A media buyer, speaking anonymously, said AMG can provide managed service if an advertiser doesn’t know how to use the self-serve Amazon Advertising Platform yet plans to spend more than $35,000 on display advertising on Amazon. In that case, AMG would charge a percentage of the advertiser’s media spend as a managed service fee and a platform fee on top of that, this person said.
Dallaire said Amazon will continue investing in ad tech, search advertising and data intelligence products. One area where Amazon is not going to incorporate advertising is its voice assistant Alexa, although Ramsey said Amazon has about a 70 percent share of the voice market.
“Our advertisers are interested in Alexa and how their brands may be able to interact with their audience there, but we don’t plan to have ad products for Alexa,” said Dallaire.
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