Amazon starts to make real waves in the global ad market

EARLIER this year, AIB became the first Irish company to advertise on Amazon’s sprawling e-commerce platform, with a series of ads promoting the bank’s personal credit and mortgage offerings. The bank’s media agency, Starcom, noted at the time that “it is crucial that brands are part of this eco-system”, while AIB’s head of marketing, Mark Brennan, said Amazon “could be the sleeping giant of digital advertising in Ireland”.

Since then, not surprisingly, other Irish brands have gone on to dip their toes in the mighty reservoir that is Amazon, as it continues its upward trajectory in the online retailing world, cloud-based web services and, now, advertising.

With net sales of $233bn (€211bn) last year and a market capitalisation in excess of $1 trillion (yes, that’s correct), it would appear that Amazon can do no wrong, particularly at a time when a lot of regulatory, political and consumer ire has been directed at other platforms over the past two years.

While Google and Facebook may have cornered the lion’s share of the global digital advertising market in recent years, Amazon now has this duopoly firmly within its sights. But it still has some way to go.

According to the research firm Juniper Research, Amazon’s advertising-based revenues could hit $40bn by 2023, up from the $10.1bn it clocked up in 2018 — which in itself was a staggering 117pc increase on the $4.7bn it made from advertising in 2017.

Even at $40bn, it would only give the company a market share of around 10pc of all global digital advertising spend which, by 2023, Juniper reckons will be worth a whopping $520bn. But, hey, $40bn in advertising revenues, combined with the billions of dollars it makes from online retailing and web services, is not to be sneezed at.

There are a number of reasons why Amazon has become such an attractive alternative to the likes of Google and Facebook.

With more than 300 million active customers worldwide, over 100 million of whom are paid-up Amazon Prime subscribers, it may trail the likes of Facebook in terms of members but, when you think about it, most of its users have one thing in common: purchase intent. And advertisers love nothing more than to get their message or product offering in front of people who are in the mood for a bit of online or offline shopping.

Even if they are only researching their potential purchase, there is still a good chance of snaring them with a user-friendly online platform that pretty much stocks anything you can think of.

But Amazon’s trump card is that it possesses huge reservoirs of first-party data on its customers and knows what they might be in the market for, whether they just purchase one or two items a year, or they are fully paid-up members of Amazon Prime, who do most of their shopping online or watch movies on its streaming service.

And if they are one of the estimated 100 million customers who actively use Amazon’s proprietary voice assistant, Alexa, then all the better.

Such is people’s reliance on Amazon in America that Scott Galloway — a professor at the Stern School of Business in New York — noted in his excellent 2018 book The Four that “40pc of US households have a gun and 52pc have Amazon Prime. Wealthy households are more likely to have Amazon Prime than a landline phone”.

What’s interesting for Amazon — and possibly concerning for Google — is that it is now being viewed as an important starting point for consumers looking to buy something.

While they may buy it from Amazon, they might also buy it elsewhere. But the key point is that the search often starts on Amazon. A few years ago, Google, more or less, had the monopoly on search. Not any more.

There are other reasons why advertisers and agencies are now diverting advertising investment away from the likes of Google and Facebook and into Amazon.

Apart from the all-important purchasing intent, brand safety is often cited as one of the top reasons why advertisers are ploughing money into Amazon, according to some media folk.

At a time when competing platforms in social media have been defending themselves from scandal after scandal, Amazon has been busy just getting on with it.

“There’s no chance that your ad will appear beside a video inciting hate-crimes, racism or anything else controversial, as has happened in the past with some of the other platforms,” said one media agency chief executive who declined to be named.

“It’s also good that there’s more choice and more competition in the market, but it’s still early days for Amazon in terms of its advertising offering. If it can dial this up over the next few years, then it could pose a serious threat to both Facebook and Google,” he added.