Ever since Amazon (NASDAQ: AMZN) ramped up its efforts in the digital advertising space, it has been taking market share away from Alphabet’s (NASDAQ: GOOGL) Google, as consumers bypass the search engine and instead search for products directly on the e-commerce website. However, with Apple’s latest privacy update, Amazon is now able to erode away at Facebook’s (NASDAQ: FB) pool of advertisers, too.
As Bloomberg reports, Facebook has thus far been able to keep its pool of advertisers relatively intact, because social media websites fell under a different set of rules from the online advertising that is prominent on Google and Amazon. However, once Apple unveiled a new set of sweeping privacy measures on its iPhones that limited Facebook’s advertising effectiveness, a new opportunity for Amazon emerged.
A number of brands were soon forced to find new alternatives to Facebook and Instagram for their advertising and some have turned to Amazon, which boasts an estimated Prime subscriber base of 153 million consumers. Although the transition to Amazon from Facebook has thus far been minuscule, Bloomberg notes that it is still too early to gauge how far-reaching the transition is or how long it will last.
According to Belardi Wong, a marketing agency based in New York, told Bloomberg that over 40% of its June roster saw the effectiveness of its Facebook advertising significantly decline, forcing the company to find ulterior options. “We’re seeing more and more of our clients branch out to marketplaces like Amazon,” explained Polly Wong, the agency’s president. “More clients are selling on Amazon and having a huge marketplace business.”
Initially, Amazon was reluctant to enter the $191 billion digital advertising market, as the e-commerce giant thought that too many advertisements would ultimately deter consumers. Fast forward to today, though, advertising strongly supplements Amazon’s low margin e-commerce business, as it now holds about 10.7% of the entire digital advertising market in the US. In fact, according to data from EMarketer Inc, Amazon’s second quarter earnings report showed that its “other” category, which mainly accounts for advertising revenue, rose by 87.5%— considerably higher than the 56% growth in Facebook’s ad sales.
Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.