Amazon planning to push into Online Ad Business

Reported by CNBC, Amazon.com, Inc. (NASDAQ: AMZN) is looking to expand its presence in the online advertising business, not only for its own products, but other third party sellers as well.

Sources also claim that Amazon is in the works with another third party, Kargo to help with its mobile advertising expansion into televisions and mobile devices.

CFO Brian Olsavsky said in the company second quarter earnings call in July that it’ll begin ramping up hiring for its advertising segment.

Amazon did not comment on the matter.

Digital Ad Market

The digital advertising market was approximately $209 billion globally in 2017, according to Magna Global. The U.S. alone spent $40.2 billion in the first half of the 2017 fiscal year, according to Interactive Advertising Bureau.

eMarketer estimates that Amazon is the fifth largest digital advertiser in terms of revenue, but only makes up 2 percent of the segment.

Facebook and Amazon are the two largest companies and dominate in the online advertising business. Facebook drew in $10.1 billion in advertising revenue out of $10.3 billion net revenue for the third quarter. Google drew in $24 billion in advertising revenue out of $27.8 billion net revenue for the third quarter.

Facebook and Google alone control over 63 percent of the market’s revenue, according to eMarketer. Due to that, the two are able to control prices as well as maintaining privacy from users. Advertisers have been pushing to find another competitor in order to lower prices.

Two sources told CNBC said that Amazon is willing to share more user information compared to Google and Facebook if an advertiser spent more.

Future for Amazon

Amazon has been rapidly expanding and diversifying its business this year. What first originally was an e-Commerce retailer has blown into all directions. The company has branched off into fresh produce delivery, business focused segments, cloud services, advanced delivery, and potentially pharmaceutical business.

Within the next year, the online advertising market is expected to grow another 13 percent to $237 billion. The market is rapidly expanding and Amazon wants to take a stake within the business.

Although Amazon has other segments that aren’t reliant on the retail business, they are still developing, so the company heavily revolves around retail revenue. The advertising business can help bolster or even help mitigate losses for net revenue.

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