As Amazon's Ad Revenues Continue To Grow...
The past 10 years has seen majority of online advertising spend go to two major tech giants (Facebook and Google). With Amazon entering the market, what does this mean for the rest of the industry?
According to sources like the visualcapitalist.com, Facebook and Google account for more than half of the online advertising market with the next competitor being Microsoft at 3.8%.
It is interesting to note, that aside from Amazon on this list, the rest can be classified into two buckets: a social media platform and a search engine. Both have their unique advantages when it comes to audience targeting.
Social Media Platforms
These platforms have information about us as individuals, our interest and who else we are connected to. Unlike search engines that play more of a utilitarian role, these platforms seek to entertain us because capturing our attention gives them more opportunity for ad impressions.
Search engines focus on shortening the time to answers to questions that we may have and in doing so, we are also displaying intent to learn more about a particular topic. This is valuable for advertisers to figure out when we might be in the market for new products and/ or services.
A new opportunity?
With Amazon's entrant into the market, a new platform seems to have emerged. Rather than focused on generic search queries, searchers on Amazon clearly indicate a much higher intent to purchase.
Given its position in the market, analyst are expecting Google's ad revenue to suffer the most in 2019. Some advertisers are already starting to move as much as half their marketing budget onto Amazon.
At this juncture, this doesn't seem to have influenced the market power of the social media platforms which still holds valuable information. This however, could change in a heartbeat.
Remember the streaming platform Amazon purchased for a billion dollars years ago?
Yes, I'm talking about Twitch and with the rise of e-sports as a major category, time of more and more gamers is being relocated away from social media.
As the e-commerce giant continues to grow, we could see Amazon owning up to 10% of the market. Is this necessarily a good thing?
A huge trapdoor?
Unlike other search engines, Amazon stands to gain regardless of whether the ads are clicked.
Even as paid ads are displayed, Amazon's recommendation engine is still hard at work behind the scenes trying to promote their own brands.
As Amazon continues to court small and medium-sized businesses, everyone of those businesses might eventually have to start playing a tax to the almighty giant who can, at the flip of a switch, choose to start manufacturing their own product line based on sales trends.
Unfortunately, it is an incredibly hard for a small and medium-sized business to gain traction in the crowded online market.
Organic channels eventually stall out because platforms want advertisers to pay for more reach.
If you are a small business solely relying on paid advertising, you are only choosing between Amazon, Google and/or Facebook.
You have to start thinking about other ways of generating traffic.