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Amazon (AMZN - Free Report) and Google are increasingly pitted against each other in all the markets in which they operate. But who will be the winner is a harder question to answer. As things stand now, the scales are evenly balanced, but who knows what the next decade will see?
Competition for Ad Dollars
Last week, a couple of analysts had things to say about Amazon’s advertising business, which has been gaining momentum in recent months.
BMO Capital's Daniel Salmon has said that the leading online retailer was stealthily creeping up on Alphabet (GOOGL - Free Report) -owned Google and Facebook and would steal digital advertising dollars from the market leaders. He thinks Amazon’s North America “Other” segment (attributed mostly to advertising) will grow 65% to $3.5 billion this year.
eMarketer estimates that Amazon will generate more than a 1 billion dollars in U.S. ad revenue in 2017 compared to Google’s $34 billion and Facebook’s $15 billion. But more importantly, Morgan Stanley analyst Brian Nowak estimates that this number will grow to $5 billion next year and $7 billion by 2020.
It’s apparent that Amazon is far from catching up with the leaders, but the thing to note here is that it has all that is required to have a very successful advertising business, so it may not be long before it is more than an experiment.
At the moment, Amazon mostly shows targeted ads to people based on their browsing patterns and buying decisions, whether it’s with respect to products or media. This therefore appears less intrusive and safeguards customer experience.
Its store house of customer data is very attractive for advertisers but can be a serious privacy concern if shared with them. Amazon reportedly doesn’t offer more than a broad description of a customer such as a "tech geek" or "fashionista" that advertisers can target, but it has the capability to offer more. For now, advertisers aren’t complaining.
Competition for Voice Controlled Platforms
Amazon has the lead in online retail, but that isn’t the only lead it has. The company’s Echo devices are going great guns and help it sell products and services. The artificial intelligence (AI) driven voice assistant Alexa has already been worked into a host of other everyday devices for the digital home and there are agreements to get it into even more. So Amazon is racing to build an ecosystem around Alexa and it’s safe to say that it’s taken an early lead.
The opportunity is not lost on Google of course, which also has its Google Assistant powering Google Home that can personalize your experience probably more completely (when linked to your Google profile) and also help you search for pretty much everything under the sun.
Selling ads on voice controlled devices isn’t cool yet, but Google may have tried something that wasn’t too well-received that it later said was a mistake. Since ads for the platform are yet to be figured out, Amazon has a better model at the moment, because it isn’t just selling the device but through it, also products that customers need.
Competition for Cloud Infrastructure Services
Here again, Amazon has the lead with Microsoft (MSFT - Free Report) in hot pursuit. While some place Google in the third position, others say it is preceded by IBM (IBM - Free Report) .
According to Canalys, Cloud infrastructure services generated $10.3 billion in the fourth quarter, of which Amazon’s AWS alone accounted for 33.8% while Microsoft, Google and IBM together accounted for 30.8%. The market is expected to grow 46% this year from $38.1 billion to $55.8 billion. So there’s plenty of room for all the players to grow.
Amazon seems to be expanding the fastest because of its first mover advantage, adding 11 new availability zones globally. Google added its first in Japan. Google’s advantage is that it already has servers in major regions because of its ubiquitous search engine. So it can probably expand by building those out further. But it has a very long way to go to catch up with Amazon, and also Microsoft, which has its strong product range and enterprise customer base to fall back on.
Conclusion
Google is in for some very tough competition, which will likely unfold over the next five years or so. As things stand now, Amazon looks very strongly positioned to take in some nice profits, both from AWS and its advertising business that can help it offset effect of aggressive pricing in the retail business.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Image: Bigstock
Amazon and Google: Head to Head?
Amazon (AMZN - Free Report) and Google are increasingly pitted against each other in all the markets in which they operate. But who will be the winner is a harder question to answer. As things stand now, the scales are evenly balanced, but who knows what the next decade will see?
Competition for Ad Dollars
Last week, a couple of analysts had things to say about Amazon’s advertising business, which has been gaining momentum in recent months.
BMO Capital's Daniel Salmon has said that the leading online retailer was stealthily creeping up on Alphabet (GOOGL - Free Report) -owned Google and Facebook and would steal digital advertising dollars from the market leaders. He thinks Amazon’s North America “Other” segment (attributed mostly to advertising) will grow 65% to $3.5 billion this year.
eMarketer estimates that Amazon will generate more than a 1 billion dollars in U.S. ad revenue in 2017 compared to Google’s $34 billion and Facebook’s $15 billion. But more importantly, Morgan Stanley analyst Brian Nowak estimates that this number will grow to $5 billion next year and $7 billion by 2020.
It’s apparent that Amazon is far from catching up with the leaders, but the thing to note here is that it has all that is required to have a very successful advertising business, so it may not be long before it is more than an experiment.
At the moment, Amazon mostly shows targeted ads to people based on their browsing patterns and buying decisions, whether it’s with respect to products or media. This therefore appears less intrusive and safeguards customer experience.
Its store house of customer data is very attractive for advertisers but can be a serious privacy concern if shared with them. Amazon reportedly doesn’t offer more than a broad description of a customer such as a "tech geek" or "fashionista" that advertisers can target, but it has the capability to offer more. For now, advertisers aren’t complaining.
Competition for Voice Controlled Platforms
Amazon has the lead in online retail, but that isn’t the only lead it has. The company’s Echo devices are going great guns and help it sell products and services. The artificial intelligence (AI) driven voice assistant Alexa has already been worked into a host of other everyday devices for the digital home and there are agreements to get it into even more. So Amazon is racing to build an ecosystem around Alexa and it’s safe to say that it’s taken an early lead.
The opportunity is not lost on Google of course, which also has its Google Assistant powering Google Home that can personalize your experience probably more completely (when linked to your Google profile) and also help you search for pretty much everything under the sun.
Selling ads on voice controlled devices isn’t cool yet, but Google may have tried something that wasn’t too well-received that it later said was a mistake. Since ads for the platform are yet to be figured out, Amazon has a better model at the moment, because it isn’t just selling the device but through it, also products that customers need.
Competition for Cloud Infrastructure Services
Here again, Amazon has the lead with Microsoft (MSFT - Free Report) in hot pursuit. While some place Google in the third position, others say it is preceded by IBM (IBM - Free Report) .
According to Canalys, Cloud infrastructure services generated $10.3 billion in the fourth quarter, of which Amazon’s AWS alone accounted for 33.8% while Microsoft, Google and IBM together accounted for 30.8%. The market is expected to grow 46% this year from $38.1 billion to $55.8 billion. So there’s plenty of room for all the players to grow.
Amazon seems to be expanding the fastest because of its first mover advantage, adding 11 new availability zones globally. Google added its first in Japan. Google’s advantage is that it already has servers in major regions because of its ubiquitous search engine. So it can probably expand by building those out further. But it has a very long way to go to catch up with Amazon, and also Microsoft, which has its strong product range and enterprise customer base to fall back on.
Conclusion
Google is in for some very tough competition, which will likely unfold over the next five years or so. As things stand now, Amazon looks very strongly positioned to take in some nice profits, both from AWS and its advertising business that can help it offset effect of aggressive pricing in the retail business.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>