Amazon.com Inc. (AMZN) isn’t a formidable player in online advertising, a market dominated by Facebook (FB) and Alphabet’s Google (GOOG). But in the coming years, the e-commerce giant could see that side of the business grow to roughly $20 billion, challenging the incumbents.
That’s according to Cenkos Securities media analyst Alex DeGroote, who told CNBC that Seattle, Washington-based Amazon could hit the $20 billion market in 2020, driven in large part by growth in ads for search, not display ads. "I think Amazon will do retail search and take Google to the cleaners on retail search using their estate," DeGroote said in an interview with CNBC. "Slowly over time, you will use Amazon as your retail search engine rather than Google." (See more: A Trump Breakup of Amazon Is 'Pure Fantasy.’)
The e-commerce giant has been picking up its pace when it comes to landing advertising dollars as it aims to chip away at Facebook and Google’s dominance. Earlier in January CNBC, citing unnamed sources, reported Amazon has been holding talks with big consumer companies about running ads on its Alexa-powered Echo smart speakers. Some of the early talks are focused on whether or not companies would pay to be placed higher in searches on the Echo similar to what happens with Google internet queries.
Amazon is talking with companies about different promotional opportunities with some currently being tested. In one case Amazon is letting companies reach customers based on what they purchased in the past. In another test, it is letting brands promote their goods without it being tied to past purchases. This is on top of a December report by CNBC that Amazon is testing different advertising products across all its channels. According to CNBC, Amazon offers companies sponsored product ads that appear when searching for a specific product, headline search ads that are shown at the top of the page in search results and a product display ad. (See more: Facebook, Google Digital Ad Market Share Drops as Amazon Climbs.)
The way DeGroote sees it, currently Amazon’s ad revenue stands at $3 billion, which is just 1.5% market share. With the growth he expects to see through 2020 Amazon could have $8 billion in revenue in the U.S, giving it global advertising sales of $20 billion, according to the analyst. He noted that companies that sell through Amazon would likely pay up to have their products features prominently on the website. DeGroote noted the company’s success in growing its cloud unit, Amazon Web Services, at a face pace and expects the same from its advertising efforts. "This is the company that without anybody realizing became the biggest cloud computing company in the world, advertising is a piece of cake," he told CNBC.