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Technology

Amazon is planning a push into digital advertising in 2018, challenging Google and Facebook

Amazon has been quietly experimenting with various advertising products across its portfolio and off its website, according to interviews with half a dozen ad buyers and technology partners. And it’s getting ready to make waves in 2018.

Most of the conversations are focusing on new ad opportunities on Amazon’s ecommerce search and video products, sources say.

The company is also looking to sell advertising beyond Amazon sites and products. For example, a source with knowledge about the situation says it is working with third-party mobile advertising companies like Kargo to pair advertising on television and on mobile screens.

Ad industry sources also say Amazon is stepping up hiring for its advertising division, especially in the New York area. CFO Brian Olsavsky noted that the company was hiring more ad sales staff on its Q2 earnings call in July.

Amazon did not respond for requests for comment on its advertising business.

Digital advertising was a $209 billion buisness globally in 2017, according to media buying research firm Magna Global. And it’s only increasing: The company predicts the industry will grow 13 percent to $237 billion next year. The U.S. is currently the most lucrative market, where advertisers spent $40.1 billion on digital advertising during the first half of 2017 alone according to digital ad industry group Interactive Advertising Bureau.

Although Amazon doesn’t break out revenues from its advertising business, eMarketer estimates Amazon was the fifth-largest digital advertiser in the U.S. in terms of revenue this year. Still, it makes up a little more than 2 percent of the market. It’s leagues below industry leaders Google and Facebook, which take home more than 70 percent combined according to a recent estimate from analysts at Pivotal.

But advertisers have been searching for a third large competitor in order to lower prices and force Google and Facebook to be more open with sharing user data. Amazon could be a major player, if only based on the sheer volume of consumer insights it has thanks to its robust ecommerce business.

Two media buyers said Amazon showed some willingness to share a more user data than Google and Facebook has traditionally — if the advertising budget was big enough.

As a result, advertisers are welcoming Amazon with open arms, with one media buyer saying some of its consumer packaged goods clients already spend more on Amazon search ads than Google.

Another media buyer said that while Google is still the search ad category leader, Amazon is gaining ground and budgets are quickly shifting in its direction.

“Driving conversion and sales or creating very immersive high-impact branded content is what is what drives a lot of digital advertising revenue,” said advertising agency Huge CEO Aaron Shapiro. “Amazon is a player in both those areas.”

Amazon already allows companies to sponsor product listings so they will show up on the top of relevant search results in its store. It wants to expand, offering advertisers better data and algorithms to ensure its items get in front of the ideal customer. It’s also selling custom pages with built in video and stories to help their products stand out from the rest, similar to how this Acura ad looks.

“Amazon likes to talk about how 56 percent of product searches are coming through Amazon,” said media agency Mindshare senior partner Diana Gordon. “It’s definitely a stat that causes advertisers to stand up.”

If you remove the buy box on Amazon’s site, it would rank in the top five of daily trafficked sites online, Gordon explained. Amazon can not only drive sales, it’s becoming a place for people to read reviews.

“We know that consumers are using Amazon not only as retail, but also using it as product discovery and research,” Gordon said. “It could lead to making more purchases in brick and mortar stores.”

Amazon also wants to expand video advertising business. In addition to allowing commercials on livestreamed content like it did on its Thursday Night Football streams this year, it’s pitching companies on bespoke sponsored content. The branded videos would be created by established media publishers or by Amazon’s own internal production team. Some ideas that are being floated around are creating infomercial-style videos for products with celebrity spokespeople.

“We have been having conversations of how do you take advantage of the video offering on Prime through digital advertising,” said media agency Havas Media Group digital executive vice president Sargi Mann. “Instead of having superfluous ads, how can a brand have a part of that dialogue that is not advertising in its traditional form? I am always open and like to discuss new and innovative ways in media where ads can be more of an organic insertion.”

In addition, the company has aspirations to expand advertising opportunities past owned-and-operated products. In December 2016, it launched cloud-based ad technology Transparent Ad Marketplace as a way for companies to buy display advertising on websites across the web. Header bidding services like Transparent Ad Marketplace allow media buyers to bid on available advertising inventory before Google’s DoubleClick can. Amazon wants to do more in the programmatic ad tech space, according to sources.

The company is also looking to mobile ad technology partners to find ways to advertise across multiple devices. For example, it is in talks to work with Kargo to pair commercials with mobile ads, sources say. Theoretically, a sponsored product sold on Amazon would run during a TV show and then seconds later a viewer would be able to see a related ad on their mobile phone.

But Amazon has some disadvantages as it looks to take on pure-play advertisers Google and Facebook. In particular, working with Amazon causes conflict for some companies, since it is disrupting the way they traditionally sold products, forcing them to change strategies.

“The reality is Amazon makes a lot of brands and companies nervous, and presence on Amazon is a necessary evil,” said RPA chief product officer of media Thomas Choi. “For others in categories like automotive, it’s going to replace the existing sales and purchase process. It’s a little bit of a mixed bag about how brands perceive them.”

Source: Tech CNBC
Amazon is planning a push into digital advertising in 2018, challenging Google and Facebook

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