Can Amazon's Video Ad Plans Disrupt Google-Facebook Duopoly?
Amazon AMZN is aggressively focusing on growing its ad business in order to bolster presence in the digital advertisement world.The company is reportedly rolling out video ads on smartphones by selling video spots on its online shopping app.
Amazon is a dominant name in the e-commerce market. The company’s expanding e-commerce customer base is a key catalyst in attracting advertisers. This is likely to disrupt the global digital advertisement space, which is currently worth $129 billion per Bloomberg.
Per a report from Statista, digital advertisement space is expected to generate revenues of $63.5 billion in 2019. Additionally, video advertising space is expected to generate $35.6 billion revenues in 2019. Further, the market is anticipated to hit $58.8 billion in 2023 at a CAGR of 13.4% between 2019 and 2023.
According to eMarketer, mobile video advertising spending by brands and companies will reach around $16 billion in 2019, up 22.6% from 2018.
This presents significant growth prospect for not only incumbents like Alphabet’s GOOGL Google, Facebook FB and Twitter TWTR but also relatively new entrants like Amazon.
Amazon’s Ad-Initiatives to Aid Growth
Amazon video ads, which enable advertisers to reach out to its vast e-commerce customer base with their targeted video ads, is a major growth driver.
The company’s video ad spots product is already on beta testing mode on Apple’s AAPL iOS version of its shopping app. Further, the company is gearing up to do the same for its Android version shopping app during the later part of this year.
Amazon’s aggressive plans for its video ad spots bode well for advertisers as they currently favor spending money on brief video clips. Short videos about a product are found to be highly alluring for prospective customers as it helps them to procure information instantly.
Apart from the latest plans, the company rolled out a free ad-supported video streaming channel, Freedive, via its IMDb movie website, which will further help Amazon in attracting advertisers.
Additionally, Amazon is leaving no stone unturned to leverage the popularity of its subsidiary, Twitch, in the advertisement space on the back of its video game streaming services.
All the above-mentioned endeavors will continue to aid growth of the company’s ad business.
In 2018, the company generated $10 billion revenues from its ad business, up 95% from 2017. Moreover, Amazon’s ad revenues of $3.38 billion in fourth-quarter 2018, surpassed the mark of $3 billion for the first time.
Amazon’s Initiatives Threaten Google-Facebook Duopoly
Amazon’s growing initiatives in the digital advertisement world are likely to pose threat to Google-Facebook ad-duopoly.
Google’s video streaming platform, YouTube already supports video ads. Further, Google Ads enables advertisers to create video ads seamlessly with the help of user-friendly ad formats.
Moreover, the search giant, which carries a Zacks Rank #3 (Hold), provides rewarded video ads that are full-screen video ads and can be integrated into Android apps. Users get the option of watching these ads in full in return of in-app rewards.
Further, Facebook’s social media platform is also video-ad supportive in nature. Recently, the company launched a new program, Facebook Showcase, offering new advertising options for premium video content. With this program, the Zacks Rank #3 stock allows advertisers to purchase ad spots in advance at a fixed cost.
Further, Twitter also enables businesses to create video prompted tweets by uploading videos on ad accounts. This way Twitter, a Zacks Rank #3 company, helps in promoting business growth of these companies.
Amazon’s Ad Footprint Expanding Rapidly
Nevertheless, Amazon’s idea of leveraging the popularity of its online retail platform which holds the dominant position among all the other similar platforms is likely to strengthen its ad business. Notably, Amazon shopping app will provide more information related to the advertised products and services via the video ads under concern.
Consequently, this is likely to prevent shoppers from searching for those products outside, for instance Google search, YouTube or Facebook.
Moreover, product ads on shopping app increases the probability of converting ad clicks into direct purchase which in turn will generate revenues for advertisers. This will help the e-commerce giant to attract advertisers to its platform.
Coming to market share, an eMarketer report shows that Google which holds the dominant position in the digital ad space, acquired a market share of 38.2% in 2018. Meanwhile, Facebook’s share stood at 21.8% and Amazon’s came in at 6.8%.
However, in 2019, Google’s share is expected to decline to 27.2%. Notably, Facebook is likely to surge 22.1%. Meanwhile, Amazon which has emerged as the fastest growing player in the ad market in the recent times is expected to witness a market share of 8.8% this year.
Currently, Amazon carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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