It’s no surprise that advertising is becoming one of Amazon’s main sources of revenue: while it was virtually irrelevant just a few years ago, this year could see it reach $10 billion this year, and is expected to quadruple by 2023. The e-commerce giant is also the largest advertiser in the United States, spending approximately $6.9 billion annually.
However, as an article in Debugger, “Amazon’s Growing Advertising Business Could Change Tech Forever“, points out, there is a big difference between Amazon and other tech giants like Google or Facebook: Amazon’s advertising revenues, despite their growth, represent a tiny percentage of its total turnover, compared to at Google Where Facebookit is 84% and 98.5% respectively.
If ad-independent Amazon is already seeing similar growth in a year where digital is already overtaking traditional advertising, what does that say about its future? First, that it can be much more aggressive on its prices, since in addition to not depending on it to balance its accounts, the company generally takes a commission on sales on its platform.
Could Amazon eventually eclipse Google or Facebook, which have long dominated the online advertising scene? Obviously, in terms of brand awareness or recall, marketing certain types of products or services, advertising where the user is supposed to buy the product is a very different story. But in reality, unlike companies that live almost exclusively from advertising, Amazon charges twice: once at the start of the process, as a commission for the advertising campaign: a small sum, because what really interests Amazon, as well as the advertiser , is that this advertising is converted into sales, and another in the end, between 6% and 20% for the sale of the product as such.
The implications of Amazon’s model are potentially enormous. The company represents approximately 40% of all e-commerce in the United States, although in some specific categories such as batteries, kitchenware, DIY, golf and cosmetics, it exceeds 90%. Since its advertising is conceptually attached to the place of sale and the company wants this sale to take place, it can be expected that more and more advertisers, who see its potential, will take an interest in it, while the effectiveness of hyper-segmentation advertising on Google or Facebook is now in doubtconsidered by many to be the next big bubbleand threatened by progressive restrictions on entering personal information posed by devices and browsers from companies such as Apple.
From the user’s perspective, Amazon has a relatively pragmatic interest in our transactional, non-personal data: Amazon wants to know what we buy and what we can buy on its platform. The company, in principle, does not care what we think, what we read, how we vote or who our friends are: it simply wants us to buy from its store, and thus manages the advertising of what she thinks we might be interested in. purchase. The comparison, in terms of the threat to our privacy, is obvious.
Advertising, contrary to what some think, is not a zero-sum game in which a certain amount of money is distributed across a series of media. Much of the success of companies such as Google or Facebook is precisely their ability to break down barriers to entry into the advertising ecosystem and allow many companies to get into advertising for the first time. as is the case with many small and medium-sized enterprises. In the case of Amazon, the potential value proposition for these companies could be even greater.
Could Amazon’s advertising growth threaten Google or Facebook? While Google or Facebook have been busy building a huge advertising platform and more or less successfully building an e-commerce platform around it, Amazon has taken the opposite route: it’s built a platform hugely successful e-commerce platform, and is now creating a system so participants can pay to showcase their products. Could such an advertising ecosystem, built around the point of sale and bringing the user closer to the final click that puts the product in the shopping cart, could provide a healthier, more sensible and less frustrating user experience?