Amazon has already become something of a corporate boogeyman — and now it could be bringing its industry disruption to advertising.
When Jeff Bezos arrives as expected at the Sun Valley conference — the year’s most exclusive meeting of media industry leaders — he’ll know much more about his fellow media moguls than they know about him.
And that has them worried, especially as Amazon’s advertising business picks up.
Amazon’s growing advertising business is poised to challenge the stranglehold Google and Facebook have on the internet’s ad dollars, thanks to its growing dominance in e-commerce and growing presence in the media world.
Google knows what consumers are interested in, and Facebook knows who you are. But Amazon has what many in the advertising industry regard as the most important piece of the puzzle: what people buy. And the e-commerce giant is starting to capitalize on that data in a big way.
"It is definitely growing as a media company, but it is surging in terms of ad revenue,” said Advertising Age editor Brian Braiker. "The scary part for marketers is that [data] is all walled off, and if you want the special sauce you have to play by Amazon's rules."
Amazon still makes the bulk of its money through the sales of goods and its widely used cloud computing business, Amazon Web Services, but its advertising business is growing. In the first three months of 2018, Amazon reported revenue for its “other” segment, which is largely advertising, rose 139 percent, to $2 billion.
“What’s interesting is advertising is not their lead punch,” said Michael Kassan, founder of MediaLink, an advertising and media consultancy. “It is a tiny part of their revenue. It’s growing fast.”
Amazon has already become something of a corporate boogeyman, with shares in other companies dropping sharply anytime the e-commerce giant enters a new industry. The company is known for building businesses over years without profit, squeezing out competitors along the way.
Collin Colburn, an analyst at the market research firm Forrester Research, warned that Amazon could do the same thing to the advertising industry.
“Amazon as a business doesn’t like the middleman,” Colburn said. “And agencies are the middleman.”
The race for third
Facebook and Google reign as the dominant forces in online advertising, with the two companies expected to account for more than half of all digital ad spending in 2018.
Microsoft, Twitter, Snapchat and Verizon, with its AOL-Yahoo unit called Oath, have all been jockeying for third place in the worldwide digital advertising market, which is projected to grow 61 percent next year, to $316 billion, according to digital advertising research firm eMarketer.
But eMarketer projects Amazon will leapfrog them all with a familiar Bezos-approved strategy — patience in the short term with an eye on dominance in the long term....MUCH MOREIf interested see also:
Platforms: Amazon Could Make Billions From the Ad Business (AMZN)
Media: Google and Facebook's ‘Digital Duopoly’ and What Role Advertising Plays in All of It (plus Jeff Bezos and Izabella Kaminska stop by) GOOG; FB; AMZN
Google, Facebook And a Deep Dive Into The Future of the Future (GOOG; FB)
Amazon’s Next Big Business Is Selling You (and your data) AMZN
And many more.