Amazon a Growing Threat to Google, Facebook, Says Ad Tycoon

Amazon.com Inc. (AMZN) has been eyeing the digital advertising market in a much bigger way and its moves are putting the leaders Alphabet’s Google (GOOG) and Facebook (FB) on notice, Martin Sorrell, the chief executive of WPP, told CNBC.

During an interview at the World Economic Forum in Davos, the leader of the world’s largest advertising company, said Amazon is a threat to Google and Facebook, especially since 55% of product searches in the U.S. come from Amazon. Sorrell isn’t the only one that see opportunities for Amazon in search. Mizuho Securities analyst James Lee said in a research report highlighting an investor call with Merkle RKG, a marketing and data company, that the biggest opportunity for Amazon is in search. Still, Lee said it shouldn’t be a threat at the moment given its advertising technology is in the early stages when compared with Google search. (See more: Amazon's Digital Ad Push Threatens Facebook, Google.)

While Amazon advertising platform is tiny compared to Google and Facebook, it is growing. Sorrell estimates Google’s advertising business is around $100 billion while Facebook’s is $40 billion. Amazon is getting around $2 billion in advertising dollars, he noted. For all of 2017, the advertising executive said $5 billion was spent at Google, $2 billion went to Facebook and Amazon got $200 million from WPP clients. "This year we'll be ramping up to about $300 million," Sorrell said of Amazon in the CNBC interview. "So it's growing, but it's at a very small scale."

The Seattle, Washington 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.