Amazon.com, Inc. (AMZN), the giant e-marketer, the third-largest digital advertisement seller seems to be on the way of making it to the top. The Q1 advertising revenue, although not specifically mentioned in the annual reports, stood at $2.72 billion.
There has been a 36% increase in the income generated through these ad services from the previous year. However, the growth rate seems to be increasing at a diminishing rate, with last year’s quarterly growth figuring to 95% to 138% and revenues 57% more than that in 2016. But, the declining growth rate does not imply that the market might fall for Amazon.
Tough Competition For Google And Facebook
While on one hand, the Amazon ad-biz is soaring high, the same cannot be said for Google (GOOG). The company along with Alphabet, its parent, saw its all-time low growth rate of 15% in 2019 Q1 since 2016. This might be a result of Amazon’s expanding market share. Even though Amazon still holds little market share as compared to the top-two giants – Google and Facebook (FB) – but, it seems to be gaining a popular reputation among the CPG retailers. With more and more retailers keeping an increased budget for advertising with Amazon, things sure are looking bright for the company.
With Amazon being a shopping site as well, the consumers find it quicker and easier to search for the desired product and buy it on just a few clicks, even less with saved bank account details. Not to forget the exceptional heavy discounts and offers provided by Amazon, sparsely luring in customers. These incline retailers all the more to advertise their products on Amazon.
The Digital Age
The Amazon advertisement business seems to be quite appealing in today’s digitalization age. Google and Facebook are at the risk of losing their business to this giant. But, this does not mean that Google is at a stance of losing its prime position. Google, with its large customer base, unlike Amazon, incorporates not only a few select retailers but other business scopes as well, like that of financial service providers, realtors, etc. This puts Google a step ahead of Amazon, making it unlikely to be overthrown by the latter.
Facebook, on the other hand, has little to worry about. Its advertising model is quite different than that of Amazon or Google, which has a search-based model. Facebook takes into account the demographics, interests and online habits of its users offering them a wider range of advertisers. But, the biggest threat looms over the traditional advertisement media which might go extinct in time.