Amazon’s advertising business booms in pandemic

Ever since COVID-19 pandemic struck and people are forced to stay at homes, they are opting for online shopping. As such, online shopping conglomerates have earned significant business in 2020. Similar is the case with Amazon. The COVID-19 pandemic situation put Amazon on track for the first quarter of $100 billion and also simultaneously boosted the advertising section of Amazon. 

With more merchants filling in Amazon’s vast marketplace, brands are fighting hard to stand out in front of the buyers and are spending bulk on advertisements. This resulted in the boost of Amazon’s “other” business unit, comprising mostly of its advertising businesses. The advertisement section of Amazon is growing rapidly more than the retail sector, cloud computing and Amazon Prime subscription divisions.

As per reports, Amazon’s “other” advertisement unit will generate a staggering amount of $21 billion in revenue in the year 2020. This is a significant jump of 47% from 2019 and the rapid growth is also helping the conglomerate Amazon to shed the dominant player role in online advertising, which is Google. “I don’t fathom that there’s enough recognition compared to the size of an advertising business that Amazon is successfully developing,” stated senior analyst Andrew Lipsman. “We still expect significant, if not strong, growth in business by traditional Google standards in the years 2020 and 2021. However, Amazon is gradually eating away at that growth from Google,” he added.

Significant growth for Amazon in advertising section

47% jump for Amazon despite the pandemic, all thanks to the flourishing advertising business. (Image: Amazon Sphere 1 Building)

Amazon is significantly growing into a paid platform. Unless a brand wants to invest in their advertising platforms, it becomes harder to compete. Amazon also offers advertisers significant data build that shows the brands the effectiveness of every penny they spend in addition to the information about the buying habits of the consumers.  “I understand well the value of every penny spent on Amazon as I have witnessed the transaction,” stated Eric Heller, the head of Amazon Center of Excellence at ad agency WPP.

He also noted that studies also point out that people are significantly looking for products to buy directly from Amazon, rather than choosing Google. Heller stated that for marketers, the difference lies in connecting with the right person looking for the product than give solutions for queries.  

The majority portion of ad revenue of Amazon comes from this particular behavior, with many advertisers wanting to earn the top spots as ‘sponsored’ lists the top of product search results. This attracted millions of unique across Amazon sites every month.

Some critics argued that the sponsored results of Amazon were actually a listing tax, and an additional cost incurred to do business on top of the commission that the conglomerate already earns. This stands at over $20 billion in the last quarter itself. “Amazon is emerging as a paid platform,” stated Mitchell Bailey of Kaspien, an organization that offers e-commerce brand advertising services. “Unless the brand wants to invest in the leading advertising platforms, it becomes harder to compete.”

Sponsored posts across Amazon are a source of continual tussle between Amazon and big brands as the shopping giant allows competitors to pay to highlight above the rivals, even though a customer might have searched for a particular brand name.

In addition to the leading brands, Amazon also attracts advertising from brands that don’t sell their products on the website, like automakers and insurance companies. These are companies who want to use the purchase data rate of Amazon to target the right audience. 

Amazon recently stated to investors that 2021 will also see a significant increase in ad sales outside the main website of Amazon, seemingly on Twitch game platform, or Fire tablets and TV Stick.

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Christy Gren
Christy Gren is an Industry Specialist Reporter at Industry Leaders Magazine; she enjoys writing about Unicorns, Silicon Valley, Startups, Business Leaders and Innovators. Her articles provide an insight about the Power Players in the field of Technology, Auto, Manufacturing, and F&B.

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