Amazon Goes After $88B Ad Market

Update3 years ago
Amazon is quickly gathering momentum in a new, highly profitable arena: online advertising, where it is rapidly emerging as a major competitor to Google and Facebook.
Amazon gets the bulk of its annual revenue (estimated to be $235 billion this year) from its e-commerce business, selling everything from books to lawn furniture. Its cloud computing business, Amazon Web Services, also accounts for around 11% of its revenue but more than 50% of its operating income.
But in its latest quarterly results, it was a category labeled “Other” that caught the attention of many analysts. It mostly consists of revenue from selling banner, display and keyword search-driven ads known as “sponsored products.” That category surged by about 130% to $2.2 billion in Q1, compared with the same period in 2017.
Those numbers are tiny compared to Google and Facebook, which make up more than 50% of the $88B digital ad market. But they come with major implications for those two giants.
Much of online advertising relies on imprecise algorithms that govern where marketing messages appear, and what impact they have on actual sales. Here, Amazon has a big advantage over its competitors. Thanks to its wealth of data and analytics on consumer shopping habits, it can put ads in front of people when they are more likely to be hunting for specific products and to welcome them as suggestions rather than see them as intrusions.
Other traditional digital platforms do not have the level of purchase data that Amazon has on companies' customers. Thanks to the vast amount of data Amazon collects, it can target ads not only to basic demographics — say, women over the age of 35 — but to a more precise segment of customers who are likely to be shopping for cellphones or barbecue grills.
AMZN's stock has rallied on the back of its continued advertising revenue growth. We don't see this trend slowly anytime soon. Amazon is now focusing more on advertising, rapidly hiring and building out its capabilities in a business with high profit margins for Google and Facebook.
As its flywheel continues to spin, Amazon should continue to capture a greater share of digital ad spend in coming years.
As of this writing, AMZN was a portfolio holding of Titan Invest. This security may cease to be a portfolio holding at some point in the future.

Become a Titan investor today.

Titan Invest is an SEC registered investment adviser. By using this website, you accept our Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance. Account holdings are for illustrative purposes only and are not investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.
Refer to Titan Invest’s Program Brochure for more information. Certain investments are not suitable for all investors. Before investing, consider your investment objectives and Titan’s fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Brokerage services are provided to Titan Clients by Apex Clearing, an SEC registered broker-dealer and member FINRA/SIPC. For more information, see our disclosures. Contact: 110 Greene Street, Suite 910, New York, NY 10012. Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
© Copyright 2020 Whisker Technologies, Inc. All rights reserved.