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Amazon Expected to Grab $11 Billion in Advertising Revenue in 2019

By Evan Niu, CFA – Updated Apr 10, 2019 at 10:51AM

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The e-commerce giant continues to chip away at Facebook and Google.

Advertising has emerged in recent years as a promising -- and highly profitable -- opportunity for e-commerce giant (AMZN 1.45%). The company's digital ad platform became the third-largest in the U.S. last year, according to eMarketer, slowly but surely chipping away at the duopoly of Facebook (META -1.92%) and Alphabet (GOOG -0.29%) (GOOGL -0.50%) subsidiary Google.

Amazon's advertising momentum will continue in 2019.

Check out the latest Amazon earnings call transcript.

Male Amazon delivery worker leaning out of Prime delivery van to show female worker something on his phone

Image source: Amazon.

Getting to $11 billion sooner than expected

eMarketer has put out fresh estimates on Amazon's growing ad business. It expects the company's advertising revenue will soar more than 50% in 2019 to over $11 billion. Amazon does not directly disclose its ad revenue officially but instead includes it in a vague "Other" category, which generated $10.1 billion last year. Advertising is the biggest component in that segment.

eMarketer boosted its forecast following Amazon's fourth-quarter earnings release, which showed ongoing momentum in the ad business. The market researcher had previously thought Amazon would hit $10.9 billion in ad sales in 2020. Amazon is expected to grab 9% of the U.S. digital ad market in 2019. Facebook and Google are expected to see their combined market share decline modestly, even as their ad revenue grows in absolute dollar terms, buoyed by the broader market's growth. Digital ad spending is expected to overtake traditional ad spending for the first time this year, according to the report.

"Amazon has a major benefit to advertisers, especially consumer packaged goods and direct-to-consumer brands," eMarketer forecasting director Monica Peart said in a statement.

She continued:

The platform is rich with shoppers' behavioral data for targeting and provides access to purchase data in real-time. This type of access was once only available through the retail partner to share at their discretion. But with Amazon's suite of sponsored ads, marketers have unprecedented access to the 'shelves' where consumers are shopping.

On Amazon's most recent earnings call, director of investor relations Dave Fildes elaborated on some of the things Amazon is doing to grow the business:

Yeah, yeah. I mean, we're continuing to -- there's a lot of focus on serving that customer set. One of the things we're trying to do is continually evolve our tools and the products to help that customer set -- agencies, advertisers -- make sure they've got a variety of ways to meet their goals. Some of the things we've done more recently over the last few months or so is expanded sponsor brands placements, some rolled out new campaign reports, improve campaign manager features. So, there's a number of things beyond that. But features out there that are just gonna make it easier for companies to grow with the ad tools and the ad services that we offer. And we're continually excited about the opportunity there.

Once upon a time, Google's former CEO, Eric Schmidt, said Amazon was the search giant's biggest competitor. This is precisely why.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former Director of Market Development and Spokeswoman for Facebook and sister to CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Amazon and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Facebook. The Motley Fool has a disclosure policy.

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