4 Reasons Amazon Is Set To Win The Advertising War

December 03, 2017

Amazon is the sleeping giant in the ad business, breaking $1 billion in revenues. As I assess the ad tech landscape, it seems like Amazon is the only player with the power to turn the Facebook-Google duopoly into a triopoly.

So far, despite racking up some $1.4 billion in advertising revenues last year, Amazon has been coy about its ambitions in the segment. Though the company hosted a party during Advertising Week in 2012 to announce its entry into advertising, a lot of Amazon's efforts have been behind the scenes. In July, though, the company stepped up its efforts a bit with Spark, an Instagram-like shoppable feed of stories for Prime members.

In the past year or so, Amazon has launched a programmatic marketplace and is working with A-list brands to target consumers. Currently, Amazon's advertising mostly benefits Amazon's retail business but that could change over time. EMarketer predicts that Amazon's ad business will grow to $2.4 billion by 2019, making it a distant third behind Facebook and Google. If Amazon decided to focus more on advertising, though, it could shake up the industry. Here's why:

1. Amazon has the best data. Facebook knows what you like and Google knows what you're searching for, but Amazon knows what you buy. For marketers, that information is much more useful. For instance, a footwear marketer might be interested to find that a certain customer buys himself a new pair of sneakers every year around his birthday. Because it's also an online retailer, Amazon can use that data to drive sales and then show a correlation between ad exposure and purchases.

2. Amazon is no pushover. While Google and Facebook derive most of their revenues from advertising, Amazon is a huge online store. That means it can go toe-to-toe with those two. When Facebook saw Snapchat as a threat, it copied Snapchat's most popular features on Instagram and neutralized the threat. That wouldn't happen with Amazon.

3. Amazon is a player in media. As Facebook tries to get its TV-type programming off the ground, Amazon has been offering streaming video for more than a decade and has created Emmy-winning original programming and Oscar-winning films. As Spark's introduction shows, Amazon is also willing to create its own social media platforms if need be. Amazon's ability to create media means it could control the whole user experience around advertising. There's no advertising on Amazon Prime Video, but Amazon has experimented with the idea.

4. Alexa gives it new influence. As consumers get more comfortable with voice-based search – Google last year reported that about 20% of mobile searches are via voice — Amazon's Alexa puts it in a solid position to become a major rival to Google. Amazon's Echo, which is now in more than 8 million homes, gives it a strong head start in IoT.

These advantages illustrate that Amazon has the best shot of anyone of giving Google and Facebook some real competition. If so, that might not be great news for everyone else in the digital ad space since it could take share away from smaller players instead of the duopoly. Having a third walled garden would also hamper marketers' efforts to create a single view of the customer. On the other hand, Amazon could take power from Facebook and Google and open up the market a bit. Whether the effect is positive or negative, though, Amazon is poised to become a bigger player in advertising. Facebook and Google should be worried.