Amazon is planning a push into digital advertising in 2018, challenging Google and Facebook
Amazon is planning a push into digital advertising in
2018, challenging Google and Facebook
Amazon is expanding advertising efforts in 2018,
especially on its search and video products.
It also has plans to increase advertising sales off its
platform, including partnering with third-party technology companies to sell
partnered TV and mobile ads.
By Michelle Castillo December 26, 2017 CNBC.com
Amazon has been quietly experimenting with various
advertising products across its portfolio and off its website, according to
interviews with half a dozen ad buyers and technology partners. And it's
getting ready to make waves in 2018.
Most of the conversations are focusing on new ad
opportunities on Amazon's e-commerce search and video products, sources say.
The company is also looking to sell advertising beyond
Amazon sites and products. For example, a source with knowledge about the situation
says it is working with third-party mobile advertising companies such as Kargo
to pair advertising on television and on mobile screens.
Ad industry sources also say Amazon is stepping up hiring
for its advertising division, especially in the New York area. CFO Brian
Olsavsky noted that the company was hiring more ad sales staff on its Q2
earnings call in July.
Amazon did not respond to requests for comment on its
advertising business.
Why Amazon wants in
Digital advertising was a $209 billion business globally
in 2017, according to media buying research firm Magna Global. And it's only
increasing: The company predicts the industry will grow 13 percent to $237
billion next year. The U.S. is currently the most lucrative market, where
advertisers spent $40.1 billion on digital advertising during the first half of
2017 alone, according to digital ad industry group Interactive Advertising
Bureau.
Although Amazon doesn't break out revenues from its
advertising business, eMarketer estimates Amazon was the fifth-largest digital
advertiser in the U.S. in terms of revenue this year. Still, it makes up a
little more than 2 percent of the market. It's leagues below industry leaders
Google and Facebook, which take home more than 70 percent combined, according
to a recent estimate from analysts at Pivotal.
But advertisers have been searching for a third large
competitor in order to lower prices and force Google and Facebook to be more
open about sharing user data. Amazon could be a major player, if only based on
the sheer volume of consumer insights it has thanks to its robust e-commerce
business.
Two media buyers said Amazon showed some willingness to
share more user data than Google and Facebook have traditionally — if the
advertising budget was big enough.
As a result, advertisers are welcoming Amazon with open
arms, with one media buyer saying some of its consumer packaged goods clients
already spend more on Amazon search ads than Google.
Another media buyer said that while Google is still the
search ad category leader, Amazon is gaining ground and budgets are quickly
shifting in its direction.
"Driving conversion and sales or creating very
immersive high-impact branded content is what drives a lot of digital
advertising revenue," said Aaron Shapiro, CEO of advertising agency Huge.
"Amazon is a player in both those areas."
Amazon's expansion plans
Amazon already allows companies to sponsor product
listings so they will show up at the top of relevant search results in its
store. It wants to expand, offering advertisers better data and algorithms to
ensure its items get in front of the ideal customer. It's also selling custom pages
with built-in video and stories to help advertisers' products stand out from
the rest, such as this Acura ad.
"Amazon likes to talk about how 56 percent of
product searches are coming through Amazon," said Diana Gordon, senior
partner at media agency Mindshare. "It's definitely a stat that causes
advertisers to stand up."
If you remove the buy box on Amazon's site, it would rank
in the top five of daily trafficked sites online, Gordon explained. Amazon can
not only drive sales, it's becoming a place for people to read reviews.
"We know that consumers are using Amazon not only as
retail, but also using it as product discovery and research," Gordon said.
"It could lead to making more purchases in brick-and-mortar stores."
Amazon also wants to expand video advertising business.
In addition to allowing commercials on livestreamed content like it did on its
Thursday Night Football streams this year, it's pitching companies on bespoke
sponsored content. The branded videos would be created by established media
publishers or by Amazon's own internal production team. Some ideas that are
being floated around are creating infomercial-style videos for products with
celebrity spokespeople.
"We have been having conversations of how do you
take advantage of the video offering on Prime through digital
advertising," said Sargi Mann, digital executive vice president at Havas
Media Group. "Instead of having superfluous ads, how can a brand have a
part of that dialogue that is not advertising in its traditional form? I am
always open and like to discuss new and innovative ways in media where ads can
be more of an organic insertion."
In addition, the company has aspirations to expand
advertising opportunities past owned-and-operated products. In December 2016,
it launched cloud-based ad technology Transparent Ad Marketplace as a way for
companies to buy display advertising on sites across the web. Header bidding
services such as Transparent Ad Marketplace allow media buyers to bid on
available advertising inventory before Google's DoubleClick can. Amazon wants
to do more in the programmatic ad tech space, according to sources.
The company is also looking to mobile ad technology
partners to find ways to advertise across multiple devices. For example, it is
in talks to work with Kargo to pair commercials with mobile ads, sources say.
Theoretically, a sponsored product sold on Amazon would run during a TV show
and then seconds later a viewer would be able to see a related ad on their
mobile phone.
But Amazon has some disadvantages as it looks to take on
pure-play advertisers Google and Facebook. In particular, working with Amazon
causes conflict for some companies, since it is disrupting the way they
traditionally sold products, forcing them to change strategies.
"The reality is Amazon makes a lot of brands and
companies nervous, and presence on Amazon is a necessary evil," said
Thomas Choi, RPA chief product officer of media. "For others in categories
like automotive, it's going to replace the existing sales and purchase process.
It's a little bit of a mixed bag about how brands perceive them."
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