Amazon might as well have a new tagline worded ‘simply amazing’. It has the knack of growing significant revenue in new business segments. Amazon Web Services (AWS) was one, leading the world into a cloud era. Today, we’re seeing Amazon’s advertising arm coming to the fore. Amazon is no longer just e-commerce.
The top 2 digital advertising platforms of 2021 are none other than Alphabet and Meta Platforms; they generated revenues of $258b and $118b respectively.
YouTube is a key contributor to Alphabet’s advertising empire, generating $29b for the parent company in 2021. Although it has paid versions, majority of the revenue came from ads. YouTube alone is comparable to Netflix’s revenue of $30 billion.
Amazon’s advertising revenue of $31b has both surpassed YouTube’s and Netflix’s!
Google bought YouTube in 2006 for $1.65b. It was definitely a hell of a deal. Amazon advertising started as early as 2012. That means that Amazon’s advertising grew much faster than YouTube – it took about 16 years for YouTube to hit almost $30b rev while Amazon just took 6 years to go above it.
It is a little unfair to compare YouTube to Amazon advertising. Amazon-owned video streaming Twitch is a more apple-to-apple comparison. Twitch revenue in 2020 was $2.3b with $750m coming from ads. It is minuscule compared to YouTube.
Amazon product search is more akin to Google’s search. So if we compare Amazon’s $31b to Alphabet’s $258b, Amazon’s ad revenue is still not there yet.
Google prides itself of having the ability to target high-intent customers because users who search for certain products or services are likely to be genuine buyers.
This is where Amazon is trying to carve an ad market for itself. Users who search on Amazon have even higher intent than those searching on Google. Why else are you searching on Amazon? Unlikely it is for information except for price comparison – the intention is still to buy.
This means that Amazon is able to charge even higher ad rates as the conversion rates are better for advertisers. There will be more room to grow as users go to Amazon to search for products rather than on Google. I believe Amazon’s ad revenue is likely to grow faster than Google in the next few years.
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