Amazon’s advertising business is expected to reach $26 billion this year. Can it become the “second Google”?


Tencent technology news on August 31, although Amazon has not disclosed its advertising revenue in its financial report, Wall Street seems to be impressed by the great potential of its advertising business. It is estimated that the scale of Amazon’s advertising business is twice that of snap, twitter, pinterest and roku combined, and it is still rising.
For third-party sellers, just putting goods on Amazon’s e-commerce platform can not guarantee sales. Therefore, they also need to advertise. Amazon is well aware of this, and the company charges suppliers to promote its products in the market. It should be clear that Amazon’s advertising opportunities go beyond its e-commerce business and are now penetrating into live activities broadcast live on twitch, fire TV and prime video.
It is estimated that Amazon’s advertising revenue reached $7.9 billion last quarter, a year-on-year increase of 83%, compared with $3 billion two years ago. This growth has prompted Amazon’s global advertising market share to soar from 3.8% in 2019 to 5.2% in 2020. Emarketer, a market research firm, predicts that this figure may reach 7.1% in 2023.
Looking further ahead, Amazon is expected to generate $26 billion in advertising revenue this year, which will increase to more than $85 billion by 2026. At this level, Amazon’s advertising business will account for 9% of the company’s total revenue, which will be of great significance.
Amazon’s advertising business does not need to compete directly with Google and Facebook for advertisers’ money, just as prime video does not need to steal subscribers from Netflix. Brian olsavsky, Amazon’s chief financial officer, said: “advertising is part of our flywheel.” He refers to Amazon’s goal of improving the customer experience by guiding shoppers to buy products they may be interested in.
However, the report released by emarketer predicts that by 2023, Amazon will devour Google’s share of about 220 basis points in the total digital advertising revenue in the United States, consolidating the tripartite monopoly with Google and Facebook. As Amazon dominates the e-commerce field in the United States, it is expected that the company will control 76% of the $24 billion e-commerce advertising market. In contrast, Wal Mart, which is close behind, is expected to account for only 6%.
With the continuous growth of Amazon’s online retail business, advertising revenue should also continue to grow, which is a virtuous circle. The advertising business will also bring an additional benefit. It is a business with very high profit margin, and most of the revenue will be directly attributable to net income. Today, for many Amazon stock investors, advertising may not be an important topic. But soon, it may become a key link in the company’s ecosystem and may be one of the driving forces of the rise in share prices´╝ł Tencent Technology (reviser / Jinlu)