Amazon (AMZN US) is taking direct aim at Google (GOOG US) and Facebook (FB US), with testing an Amazon Attribution tool which advertisers can compare whether ads on Amazon’s site is better than its rival. This according an article in Digiday.
This is a direct aim at mainly Google (GOOG US), but also Facebook (FB US) as advertising is their main form of revenue. As competition for search rankings are intensifying, this approach from Amazon will help it increase revenue stream from its advertising segment.
“This move will encourage brands to drive more ads to Amazon because they’ll have attribution parity,” said Connor Folley, former Amazon executive and founder of search ad platform Downstream. “Brands will see how much better their Amazon product detail pages convert compared to their own site. From an ROI perspective they’ll be hard pressed to justify driving traffic elsewhere as a result.”
Previously Google has had an advantage over Amazon as it has been the only player which offers a product that advertisers can use to measure the attribution for their campaigns.
Pernod Ricard, one of the worlds biggest Alcohol and Spirits Company are very satisfied with the results from Amazons offering. Laurent Pillet noted to Digipay;
“Amazon is a platform for both sales and advertising for Pernod Ricard,” Laurent Pillet, md of the company’s U.K. business told Digiday. “Over the last year we’ve dramatically increased the amount of media we buy on Amazon. On top of the media we buy, we’re also looking to sell more on Amazon. In 2017, our sales on Amazon grew by 100 percent and we’re now the second largest spirits provider for the site, with a market share of 10 percent. That’s far more than we have in traditional markets.”
Despite Amazon’s size and amount of traffic it gets to its site, it only generated $2.2bn in revenues from its’ advertising segment in Q2 vs Google’s advertising revenue of $28.1bn. This shows how big potential this revenue segment has for Amazon.
When Amazon reported its result in Q2, the market got positively surprised by the fact that advertising segment had such large growth (up 129%) and the share rallied subsequently.
“A big contributor to the quarter and the last few quarters obviously has been strong growth in our highest profitability businesses and also advertising,” Brian Olsavsky, Amazon’s chief financial officer, said on a call with media.
Reuters points out, one important attraction for advertisers has been Amazons (AMZN US) ability to offer placement results directly in sales, reaching customers on Amazon (AMZN US) with an intent to shop. This is a distinction from Google (GOOG US) and Facebook (FB US) which ads reaches users for a vast range of purposes.
Amazon compared to FB and Google, 6 months chart.
Source: Bloomberg
Amazon’s share price has recently rallied (almost reaching market-cap of $1trn) and if the company can continue to grow and take market share in the advertising segment, beating markets expectations will prove easy.
This is in contrast to both Google (GOOG US) and Facebook (FB US) share price, which both have fallen from their all-time highs.
