Let’s start with the forecast by experts: Amazon will make up to 77.7% of US E-commerce channel ad revenue by the end of 2022. This sums up to a $27.94-billion ad revenue contribution with the total amount going up to $35.96 billion.
Now, you can go deeper to understand the statistics behind this forecast. The growth of Amazon will remain in the double digits, similar to the results when it started being tracked in 2017. In 2020, the growth of Amazon hasn’t been any less than 56.5% which is quite huge. However, Amazon’s ad revenue is expected to increase by a good amount of 28.1% this year.
Because Amazon has been dominant in the US e-commerce channel ad market, its growth represents the growth of the entire ad market. According to eMarketer, ad spending on US e-commerce is going up by 29% this year. The total value of goods that Amazon and its third-party suppliers sell to the US customers, referred to as the GMV (Gross Merchandise Value), increased from $319.10 billion to $378.95 billion, which is 18.8%. Online sales in the USA also increased by $14.2%.
The contribution of the e-commerce channel ad spend to digital ad spend in the USA is increasing continuously. This year, it has contributed to the digital ad market by 14.5%. Moreover, the share of the e-commerce channels in the digital ad market is going to reach 20.1% by the end of 2026.
Amazon vs Other Corporate Giants
The ad revenue growth of other e-commerce platforms like eBay, Walmart, and Etsy has been less than the prediction for 2021. It’s mainly due to the coronavirus pandemic as well as supply chain issues. The contemporaries of Amazon are now working harder to improve their ad capabilities. As a result, the e-commerce business is going to boom. This clearly shows that e-commerce and advertising channels are not going anywhere as they will stay and keep growing!
The giant e-commerce web accounted for more than half of the total gain in the US e-commerce. Now, both the e-commerce channel search and channel display ad spending have had a continuous upward growth since 2020. According to the forecast, it will continue increasing until 2026. In 2026, e-commerce channel search ad spending will reach $55.71 billion, while e-commerce channel display ad spending will reach $17.31.
As a whole, the e-commerce channel ad spend will reach $73.02 billion in the USA by the end of 2026. The increase of $37.06 billion in e-commerce ad spending in 4 years clearly indicates where Amazon is going to be in the future.
Why Amazon’s Ad Revenue Is Constantly Increasing
Now that you understand the statistics, you must also know the reasons behind the increase in Amazon’s ad revenue.
It’s Larger Than Snapchat and Twitter
Amazon’s advertising business is eight times greater than Snapchat’s entire business and seven times greater than Twitter’s. Since Google and Facebook have been headpins in the digital advertising market, Amazon is taking its market share from these two platforms as well.
It’s the Number 1 Search Platform for Online Shopping
The boom in Amazon’s ad business can be explained through various reasons and aspects. One of the prominent reasons is that Amazon is a platform from where 74% of the consumers start their online shopping searches. It means that when a consumer has to search for a product online, he would go directly to Amazon rather than Google.
At the top of Amazon, you can see an ad banner of a featured brand while searching for a product. It will have a “Sponsored” tag on it. It indicates that sellers know where consumers are going to come to search for products, so they are more than willing to pay for brand visibility.
It’s a One-Stop Shop
The other highlighted reason for Amazon’s success in the advertising business is that it has become a “one-stop-shop” or “everything store.” It convinces buyers that whatever they want to buy will be available here. People tend to search for everything they want on Amazon. It’s the reason why ad dollars have now shifted to Amazon from Google.
As a result, more and more manufacturers are paying to get sponsored slots on Amazon, even if it requires paying extra advertising fees. Manufacturers are also looking for their best interests as, in return, they earn more revenue by selling directly on Amazon instead of doing it through a retailer.
Furthermore, a lot of macro trends have been in Amazon’s favor. The depreciation of third-party cookies requires digital media advertisers to run scalable targeted campaigns. It is exactly what Amazon’s retail marketplace offers. So, a lot of businessmen move toward this platform to sell their products.
COVID-19’s Effect on e-Commerce Trends
The coronavirus pandemic also resulted in the promotion of the e-commerce business which further caused to attract more shoppers online. In the holiday quarter of 2020, Amazon reported $125.6 billion in ad revenue. Other than that, Facebook and Google also reported a rise of 20% and 33%, respectively, in their ad revenues in the fourth quarter of the last year. So, Facebook ended up making an ad revenue of almost $32.6 billion, while Google’s ad revenue grew to $61.2 billion.
According to statistics, the expected digital ad spend will be $524 billion this year and $645 by the end of 2024. The advertising revenue of Amazon was $31 billion in 2021, which is approximately the same size as the entire global newspaper industry.
In addition to the ad revenue that Amazon gets through its e-commerce platform, it also gets a huge return from its Prime Video, Video Arm, and Streaming Hardware like Fire TV. Likewise, it has signed a deal with the NFL (National Football League).
Conclusion
Amazon’s rapid success in advertising is also part of a larger trend of the walled garden platforms in which Amazon has control and power over everything. This includes content, media, application, and restriction access. It gets alot of benefits from network effects across multiple profiles of digital assets.
