More advertisers are choosing to abandon digital advertising market leader Alphabet Inc. (GOOGL) for e-commerce and cloud computing titan Amazon.com Inc. (AMZN), according to CNBC, citing multiple executives at media agencies.
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Consumer Products Find 'Bang For Your Buck' With Online Retailer
In some instances, brands told CNBC that they have decided to strategically shift 50% to 60% of their Google Search ad budgets into the hands of the Seattle-based online retailer. According to the report, most of the shift from Google to Amazon search among media strategists is coming from consumer packaged goods, while larger and more lucrative advertising categories, such as automotive and travel have not yet begun the transition.
For companies that sell products directly to customers, pointing traffic to an Amazon landing page has translated into a higher ROI.
“Over 90 percent of searches for products that start on Amazon end with a purchase, even though that user may end up on social channels,” Chris Apostle executive vice president and head of performance for North America at Havas Media, told CNBC. “The bang for your buck is where people are ultimately going to buy.” Apostle, whose firm manages clients such as Walt Disney Co. (DIS) and Emirates, indicated that some of his clients have upped their Amazon ad budgets by 300% over last year.
Amazon Now World's Third Largest Digital Advertiser
Google relies heavily on its digital advertising revenues, which make up 86% of its total sales. In 2017, the Mountain View, Calif.-based FAANG member company, which remains the leading platform in the U.S., made $95.4 billion on advertising. Research firm eMarketer estimated that a whopping 83% of Google's ad revenue has come from search ads year-to-date (YTD). This year, Google remains on track to rake in approximately 37% of digital ad budgets, as noted by CNBC.
While Google remains the clear digital ad market leader, Amazon's burgeoning advertising business, increasing in triple-digit percentages year-over-year (YOY) poses a threat to its dominance. Analysts at eMarketer estimate Amazon is the world's third largest digital ad platform behind Google and Facebook Inc. (FB), with an expected $4.61 billion in ad revenue in 2018 representing 4.1% of the total market. Its reach is only forecasted to expand as it pushes into new markets and businesses such as travel, event ticketing, and cars.
Despite the Amazon threat, Google's overall ad revenue growth managed to accelerate in the first half of 2018 compared to last year. Meanwhile, some media strategists are choosing to shift ad spend from other platforms to Google properties other than search, including its on-demand streaming business YouTube.
By 2020, eMarketer expects Amazon to control 7% of digital advertising, compared to Google's estimated 35.1% share and Facebook's 20.8% share.
(See also: Google to Spend $12 Billion to Remain Apple Safari’s 2019 Default Search Engine: GS.)