Amazon will more than double its U.S. digital-advertising revenue in 2018 — but it’s still going to be a distant third place behind the sector’s “duopoly” of Google and Facebook.
That’s according to new estimates from eMarketer. The research firm, in a report released Sept. 19, forecast Amazon U.S. ad revenue to more than double this year, to $4.61 billion. That will give Amazon 4.1% share of the market, putting it ahead of Verizon’s Oath and Microsoft on eMarketer’s rankings.
A caveat: A big reason that Amazon’s ad revenue is showing huge growth is because of an accounting change, effective Jan. 1, 2018, under which the company’s advertising services are now classified as revenue rather than cost of sales. (That led to an increase of $560 million to Amazon’s “other” revenue in Q1, to $2.03 billion for the quarter; the “other” category primarily comprises advertising.) Backing out that accounting change, eMarketer estimates Amazon ad sales will increase 10%-12% this year because of stronger-than-expected organic growth.
Meanwhile, Facebook and Google together will have about 58% market share this year. Per eMarketer calculations, Google will rake in close to $42 billion in U.S. ad dollars (for 37.1% share) and Facebook will notch $23 billion (20.6%).
And the Google-Facebook duopoly will maintain its hold for the next few years. By 2020, Amazon will have captured 7.0% share of U.S. digital ad spending, compared with Facebook’s 20.8% and Google’s 35.1%, according to eMarketer’s forecast model.
Advertising is “now a multibillion-dollar business for us,” Amazon CFO Brian Olsavsky said on the ecommerce giant’s Q2 earnings call July 26. “We have hundreds of thousands of emerging and established advertisers. And they’re using our services to achieve their marketing goals to — whether that’s to drive new brand awareness, discovery or ultimately purchase decisions on our site.”
Amazon’s priorities with respect to advertising include improving the usability of its tools for advertisers, helping “make smarter recommendations” for customers, enhancing measurement capabilities, and automating processes, Olsavsky added. The CFO also noted that international ad sales, while still much smaller than in North America, are growing just as quickly.
The company has made strides in making it easier to buy Amazon ads: On Sept. 5, the company announced that all ad buying and reporting would fall under a new Amazon Advertising banner and be fully consolidated by the end of the year.
What eMarketer doesn’t have insight into is what portion of Amazon’s advertising business comes from selling ads on its own properties and how much it sells as a third-party network facilitating ad serving across the web.