“In the U.S., Amazon represents 5 to 7% of the online advertising market”

Home Blends & Trends 4 December 2018

Hugo Loriot, head of fifty-five in the US, explains why Amazon still has a long way to go when it comes to advertising on the other side of the Atlantic.

Martin Sorrel, the iconic founder of WPP, states that Amazon will ultimately achieve a turnover of 100 billion dollars. Do you consider this a credible forecast from a U.S. standpoint?

As it currently stands, I think this is unlikely… It’s true that Amazon‘s business is experiencing strong growth, but it does not account for more than 5 to 7% of the online advertising market in the United States. While the platform does have what it takes to seduce all the advertisers of the consumer goods sector – with rich behavioural data that can help them sell better – entire segments of the search industry are still out of its reach, such as insurance, banking or travel. To be clear, I don’t see brands such as AccorHotels, Allianz and the like investing in Amazon, where the volume of requests concerning them is derisory, if not irrelevant. Until Amazon starts distributing these verticals to attract them through search, it will be very complicated.

And the same problem arises for its  display business. Its leeway is even more limited because of the weight of ‘owned and operated’ platforms like Facebook and Google. However effective it may be, the activation of Amazon’s data relies and always will rely on other platforms, whether ad exchanges or its own. Nowadays, these inventory sources weigh too little. To seek growth in display, Amazon will have to better monetise its own inventory. This being said, the group does have some strengths with Fire TV, where ads have already appeared, and with its voice assistant , Amazon Echo, which can revolutionise the relationship between brands and their consumers.

Amazon’s Fire TV set

Amazon can nonetheless create its own market with all these advertisers (including FMCGs) who invest massively in television, but only too little in digital…

The leading digital platforms have not yet convinced these advertisers to invest more, as they have not yet been able to prove their impact on sales. Many are not completely satisfied with Facebook and Google’s attribution offers, which they do not always find reliable and complicated to set up. Amazon, which has a significant market share in online sales, has a real card to play in this respect. The platform still has a long way to go, as evidenced by the still very basic reporting interface it offers. But it is moving forward and has just released in beta a tool that allows advertisers to measure the impact on their online sales. I think this tool will first be reserved for Amazon DSP customers and then for everyone… if it shows that Amazon’s advertising offer is the most effective way to sell on Amazon. It could therefore have an effect on Amazon’s advertising market share.

What about its cloud activity, Amazon Web Services?

That’s another asset! I think Amazon will be inspired by its Chinese counterpart Alibaba and offer advertisers to create their own data lake in the Amazon cloud, allowing them to build their own audiences, segment them as they see fit and activate them safely with Amazon’s DSP. This will stand as a genuine competitive advantage for the latter, as advertisers want to have more control over this subject.

 

This article was written by Nicolas Jaimes and published in its original version in French on the JDN website.

Translated from french to english by Charles Rogers

Would you like another cup of tea?