On September 4, 2018, Amazon became the second publicly traded company in the United States to reach a $1 trillion valuation. Just before noon, Amazon shares reached $2,050.49, before falling slightly to $2,037, ending the day just shy of the 13-figure number. Hitting this milestone in a short month after Apple became the first company to hit this valuation leaves many to speculate which of these 2 players will reach the $2 trillion number first.
Apple, which hit the $1 trillion revenue mark on August 2, 2018, brought in $48 billion in profits last year. Amazon, on the other hand, only saw one tenth of that profit number. But, interestingly, The New York Times reported that in a Facebook poll run by a group of young Wall Street Investors, which posed the question of which company would reach $2 trillion first, the vote overwhelmingly favored Amazon. With lower revenue numbers, what makes people so confident that a company making less money will have a more profitable future?
With a very diversified plan for the future, there are a few different aspects of Amazon’s strategy that give people confidence in the company – for example its breakout into health and pharmaceuticals, AI advancements and physical stores. But the one offering that most feel will propel Amazon into their successful future is advertising. Back in January, we wrote about how Amazon took 4th place for display ad buying in 2017 and is keeping its eyes on 3rd place. This growth has not slowed down with their ad business recently surpassing $2 billion in quarterly sales. This number might seem small when compared to digital ad giants, Google – who brought in $35 billion in digital ad dollars in 2017 – and Facebook – $17.37 billion. However, Amazon has not come anywhere close to capping the advertising capabilities on their different platforms.
Before making any major additions to its advertising, Amazon just announced that they are rebranding themselves. To avoid any confusion. Amazon Advertising will now encompass Amazon Media Group, Amazon Marketing Services and Amazon Ad Platform.
- Amazon Media Group: This group handled customized ads that required special collaboration from Amazon.
- Amazon Marketing Services: This is where brands and agencies could participate in ad auctions and buy display, search and video ads
- Amazon Ad Platform: This is where advertisers were able to target ads outside of Amazon
As Amazon Advertising now encompasses all of these areas, Amazon Marketing Services will be referred to ad “advertising console” and Amazon Ad Platform will now be known as Amazon DSP. Senior VP of Amazon Advertising stated, “This is another step towards our goal of providing advertising solutions that are simple and intuitive for the hundreds of thousands of advertisers who use our products.” This simple brand change will enable the company to push further into digital advertising.
Most of Amazon’s current advertising dollars come from product search results and sellers sponsor product slots. They are at a huge advantage as they collect data from consumers actual shopping habits, rather than just interests and searches. When ads are placed on Amazon, advertisers have a great opportunity to reach consumers at the critical moment when they are about to make a purchase.
Beyond this, Amazon has great opportunities to build advertising products on top of its existing properties, giving them a larger market share of the $88 billion digital ad industry. There is talk that they will soon sell ad space on their Thursday night football stream Twitch, a live streaming video platform. Twitch users could soon see ads if they opted out of the $9/month premium subscription. And, Amazon has yet to run ads on Amazon Prime Video. These are a few of the tactics that Amazon might introduce to reach $22 billion in digital ad revenue by 2020, making them the third largest digital advertiser.
Now is a great opportunity to take advantage of Amazon’s Advertising and DSP platform. If you want to learn more about Amazon’s capabilities and how it can add value to your media plan, or ask questions about Amazon’s Advertising capabilities, Digilant can help. Reach out to us here.