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Should Google & Facebook Fear Amazon's Growing Ad Business?
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Amazon (AMZN - Free Report) is set to become the third largest digital advertiser in the U.S. behind only Google (GOOGL - Free Report) and Facebook , according to a new eMarketer report. Digital ad sales account for a small portion of Amazon’s revenues, but its growing ad business is something investors should pay close attention to.
Advertising Growth
Amazon looks poised to overtake Verizon’s (VZ - Free Report) Oath and Microsoft (MSFT - Free Report) in eMarketer’s ranking of the largest sellers of digital advertisements in the U.S. The e-commerce giant is projected to pull in $4.61 billion in ad dollars in 2018, which is up significantly from eMarketer’s previous $2.89 billion estimate.
Amazon’s growth will see the company move into third place behind the duopoly of Google and Facebook. Jeff Bezos’ company is expected to grab 4.1% of all domestic digital ad spends, according to the eMarketer report. Despite its new standing, Amazon is projected to come in far behind Facebook’s 20.6% and Google’s 37.1% in terms of total market share. The two giants are projected to grab a combined $64 billion in digital advertising.
Investors should also understand that much of Amazon ad growth is due to an Amazon accounting change that focused on the reclassification of some advertising services from cost-of-sales to revenue. Nonetheless, the market research firm said that Amazon will post “stronger-than-expected organic growth.”
Looking ahead, Amazon is projected to see its share of all U.S. digital ad spending hit 7% by 2020. This growth would see Amazon’s ad business hit $10.92 billion in two years. EMarketer also projects that Amazon’s mobile ad revenues will skyrocket 242% to $1.61 billion in 2018 to help it grab a 2.1% share of that market.
Why It Matters
Amazon presents advertisers the ability to understand how their ad spends impact purchases. On the other hand, Facebook and Google advertisers might have a harder time finding their direct return on investment. As the e-commerce giant continues to expand it has become somewhat of a go-to search engine for consumers. This gives advertisers increased incentive to spend money on Amazon, especially third-party sellers. The company has also made it easier for companies that don’t sell products on Amazon to buy ads.
The e-commerce giant clearly knows that its ad business will become an integral part of its business going forward. The firm officially announced earlier this month that it will slowly retire the names Amazon Media Group (AMG), Amazon Marketing Services (AMS), and Amazon Advertising Platform (AAP) and roll them into Amazon Advertising. “This is another step towards our goal of providing advertising solutions that are simple and intuitive for the hundreds of thousands of advertisers who use our products to help them grow their business,” SVP of advertising Paul Kotas said in a statement.
Last quarter, Amazon’s “Other” category, which housed its ad business, saw its revenues soar 132% to hit $2.19 billion. This business was Amazon’s fastest growing unit for the third straight quarter, but also the smallest. For reference, Amazon’s widely popular AWS cloud computing business jumped 49% to $6.12 billion, while its Amazon Prime-heavy subscription unit climbed 55% to $3.41 billion.
Bottom Line
Amazon is currently a Zacks Rank #2 (Buy) based on its strong positive earnings estimate revision trends. The company is also expected to see its quarterly revenues jump 30% to reach $56.92 billion, based on our current Zacks Consensus Estimate. And now the e-commerce giant looks ready to pull in even more money in yet another new industry.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Should Google & Facebook Fear Amazon's Growing Ad Business?
Amazon (AMZN - Free Report) is set to become the third largest digital advertiser in the U.S. behind only Google (GOOGL - Free Report) and Facebook , according to a new eMarketer report. Digital ad sales account for a small portion of Amazon’s revenues, but its growing ad business is something investors should pay close attention to.
Advertising Growth
Amazon looks poised to overtake Verizon’s (VZ - Free Report) Oath and Microsoft (MSFT - Free Report) in eMarketer’s ranking of the largest sellers of digital advertisements in the U.S. The e-commerce giant is projected to pull in $4.61 billion in ad dollars in 2018, which is up significantly from eMarketer’s previous $2.89 billion estimate.
Amazon’s growth will see the company move into third place behind the duopoly of Google and Facebook. Jeff Bezos’ company is expected to grab 4.1% of all domestic digital ad spends, according to the eMarketer report. Despite its new standing, Amazon is projected to come in far behind Facebook’s 20.6% and Google’s 37.1% in terms of total market share. The two giants are projected to grab a combined $64 billion in digital advertising.
Investors should also understand that much of Amazon ad growth is due to an Amazon accounting change that focused on the reclassification of some advertising services from cost-of-sales to revenue. Nonetheless, the market research firm said that Amazon will post “stronger-than-expected organic growth.”
Looking ahead, Amazon is projected to see its share of all U.S. digital ad spending hit 7% by 2020. This growth would see Amazon’s ad business hit $10.92 billion in two years. EMarketer also projects that Amazon’s mobile ad revenues will skyrocket 242% to $1.61 billion in 2018 to help it grab a 2.1% share of that market.
Why It Matters
Amazon presents advertisers the ability to understand how their ad spends impact purchases. On the other hand, Facebook and Google advertisers might have a harder time finding their direct return on investment. As the e-commerce giant continues to expand it has become somewhat of a go-to search engine for consumers. This gives advertisers increased incentive to spend money on Amazon, especially third-party sellers. The company has also made it easier for companies that don’t sell products on Amazon to buy ads.
The e-commerce giant clearly knows that its ad business will become an integral part of its business going forward. The firm officially announced earlier this month that it will slowly retire the names Amazon Media Group (AMG), Amazon Marketing Services (AMS), and Amazon Advertising Platform (AAP) and roll them into Amazon Advertising. “This is another step towards our goal of providing advertising solutions that are simple and intuitive for the hundreds of thousands of advertisers who use our products to help them grow their business,” SVP of advertising Paul Kotas said in a statement.
Last quarter, Amazon’s “Other” category, which housed its ad business, saw its revenues soar 132% to hit $2.19 billion. This business was Amazon’s fastest growing unit for the third straight quarter, but also the smallest. For reference, Amazon’s widely popular AWS cloud computing business jumped 49% to $6.12 billion, while its Amazon Prime-heavy subscription unit climbed 55% to $3.41 billion.
Bottom Line
Amazon is currently a Zacks Rank #2 (Buy) based on its strong positive earnings estimate revision trends. The company is also expected to see its quarterly revenues jump 30% to reach $56.92 billion, based on our current Zacks Consensus Estimate. And now the e-commerce giant looks ready to pull in even more money in yet another new industry.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>