Amazon Ads: From Google.com to Amazon.com
9 out of 10 people search directly on Amazon for the product they want to buy. From searching on Google search and then being redirected to Amazon.com to directly searching on Amazon, we all have come a long way and with this, Amazon Ads was born.
Digital advertising is a huge, huge business, has always been, of all the creative and innovative products which big tech giants like Google and Meta bring to us, surprisingly enough, still their moat is advertising. To reflect on the scale, in 2020, Alphabet generated almost $183 billion in revenue, of that, $147 billion — over 80% — came from Google’s ads business. Meta Platforms annual revenue for 2020 was $85.965 billion, In effect, digital ad revenue represents 97.5% of its total revenue.
Back in 2015, when Amazon’s market cap was close to $300 billion, it was paying Google $3–4 billion a year for search ads to promote product listings at the top of its monolithic search engine, and it didn’t like it.
Unlike Google or Meta, where algorithms graph different interaction pattern of the user to judge what the user wants, Amazon’s data is a gold mine because on Amazon, user searches for the thing he/she exactly wants and nothing else, So, Amazon exactly knows what you need. Given this kind of data, it would not have been a far thought to enter the high margin Ad business for its dynamic moonshot CEO. This data is so potent and clean that it eliminates any need to have a SEO (Search Engine Optimization), which is needed to display the most appropriate Ad.
Think of it, to display an Ad for a detergent, Google needs to figure out that it must display a detergent because its query is “How to wash clothes?”, but in case of Amazon, user directly searches for “detergent” or “washing powder”.
Until 2022, Amazon had been releasing its Ads business earnings in a combined package named “others”, just like the way it likes it to be, very similar to the AWS back then, but in 2022, yesterday while I’m writing this blog, Amazon posted it earnings for the last quarter with Ad’s business revenue exclusively mentioned, and it took the entire wall street by storm, just like AWS did. — $31 billion (2021), a ginormous number. Just to put into perspective, I have always believed YouTube as an undisputable monopoly, it has $28.8 billion in Ad’s revenue in 2021, a monster in itself, now compare Amazon’s ever-growing Ad revenue.
This is only when it’s advertising on its own e-commerce platform, I can only wonder the growth when it will offer its advertising to other platforms.
Even though Amazon has its own Ad business today, it still subscribes to Google Ads or any other advertising platform, it’s trivial for these companies, in fact Google itself uses Bing Ads, but in case of Amazon it becomes a major part of its self-feeding immense money generating loop. How? A company X subscribes to Amazon Ads to be prioritized on its platform, Amazon subscribes to Google ads to display that product and when a consumer makes a purchase, X paid Amazon for its Ad as well as commission on the product purchase as well.
With Google and Meta having more than 50% of global advertising business, is there dominance really threatened with trailing giants like Amazon, Walmart etc. Definitely YES!! and the competition might not even be fair enough because Google’s and specifically Meta’s data gathering techniques are questionable, there users might not even know that they are being tracked or what part of their exposure is being tracked, that’s one solid reason they are under strict scrutiny and Meta’s attempt to pivot to metaverse, on the other hand Amazon does not even collect data, user gives his/her data to Amazon.
