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Amazon Advances in the Digital Advertising Space


Aug. 10 2019, Updated 6:55 p.m. ET

Amazon has also been gradually increasing its revenue exposure to the digital advertising business—and there’s huge opportunity in the space. For the second quarter, Amazon (AMZN) reported revenues of $3.00 billion for its “Other” product category. These revenues are mainly associated with advertising service sales. The company reported a 36.83% year-over-year increase in Other revenues for Q2. The company also reported Other revenues of $5.71 billion in the first half of 2019, a year-over-year rise of 35.34%.

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Amazon reported Other revenues as a percentage of Amazon’s total revenues of 4.73% for the second quarter of 2019. This level is higher than its 4.15% revenue exposure in Q2 of 2018. The company also reported Other revenues as a percentage of total revenues at 4.64% in the first half of 2019. This level was also higher than its 4.06% revenue exposure in the first half of 2018.

A huge global digital advertising market opportunity

Juniper Research expects digital advertising spending to grow 15% annually from $294 billion in 2019 to $520 billion in 2023. The rise of artificial intelligence to deliver targeted ads has been a key growth driver. eMarketer also expects global digital advertising spending to hit $333.25 billion in 2019 and $517.51 billion in 2023.

Plus, Juniper Research also expects Amazon to report $40 billion in advertising revenues in 2023. This level would mark a 470% rise from Amazon’s sales in 2018. The company is also expected to account for 8% of global digital advertising spending in 2023—versus a 3% share in 2018. Amazon could benefit from its store of consumer data, coupled with its machine learning capabilities.

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In 2019, eMarketer expects Amazon to become the fourth-largest global digital advertisement player, with ad sales of $14.03 billion. eMarketer expects the top three players, Google, Facebook, and Alibaba to report fiscal 2019 net digital advertising revenues of $103.73 billion, $67.37 billion, and $29.20 billion, respectively.

US market opportunities

eMarketer expects U.S. digital advertising spending to hit $129.34 billion in 2019, a year-over-year rise of 19%. Amazon is expected to report an increase in its share of US net digital advertising revenues from 6.8% in 2018 to 8.8% in 2019. On the other hand, Google’s (GOOG) market share is expected to fall from 38.2% in 2018 to 37.2% in 2019. Facebook’s (FB) market share is expected to rise from 21.8% in 2018 to 22.1% in 2019.

Plus, eMarketer has forecast a 50% year-over-year rise in US digital advertising sales for Amazon in 2019. This growth is mainly due to better targeting capabilities resulting from Amazon’s store of consumer behavior data. Amazon is expected to gradually eat into the markets of the top two players, Google and Facebook.

On May 31, Amazon announced an agreement to acquire Sizmek Ad Server and Sizmek Dynamic Creative Optimization. If the deal goes through, this acquisition could further bolster Amazon’s digital advertising revenues in the coming quarters. To learn more about the rationale behind the deal, see Why Amazon Is Eyeing Bankrupt Sizmek.


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