Amazon.com, Inc. (Nasdaq: AMZN) has a long history of targeting new markets and then blowing away the competition. Amazon is reportedly now working on upping its advertising game as a part of its effort to better monetize its massive base of customers.
CNBC has reported that Amazon is experimenting with video advertising, e-commerce search advertising and even advertisements on its Echo smart speaker devices.
Mizuho analyst James Lee says Amazon has a huge opportunity to grow and improve its advertising business and says search advertising is the largest opportunity of all.
“We believe that Amazon has plenty of headroom to improve its performance and monetization,” Lee says, according to CNBC.
Those words are enough to send a chill down Alphabet (GOOG, GOOGL) investors’ spines, since search advertising is the core of Google’s business. Together, Amazon and competitor Facebook (FB) dominate the online advertising space, accounting for 63.1 percent of all digital advertising in 2017, according to eMarketer. The firm also estimates Google could hold more than 80 percent market share of online search advertising by 2019.
Inbal Lavi, CEO of marketing company Webpals Group, says Amazon has at least one major advertising advantage over Facebook and Google.
“Amazon’s main advantage in the market is that people who are already shopping on Amazon are highly likely make a purchase (compared to users are on social media catching up with friends),” Lavi says. “In addition, they have a large pool of information on consumer purchase history – giving them a serious head start.”
On Wednesday, One Click Retail reported that Amazon was responsible for 44 percent of all U.S. e-commerce sales in 2017 and 4 percent of total retail sales of any kind.
Lee says Amazon investors should be excited about the potential of the company’s advertising business, but Alphabet investors have nothing to fear at this point.
“We do not expect the emergence of Amazon’s ad business to threaten Google’s search business,” Lee says. After meeting with marketing ad data platform Merkle RKG, Lee says…
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