Please ensure Javascript is enabled for purposes of website accessibility

Amazon Continues to Grow Search Ad Market Share

By Evan Niu, CFA - Oct 18, 2019 at 7:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Consumers increasingly head straight to Amazon when looking to buy something instead of Googling it.

Alphabet (GOOG -1.72%) (GOOGL -1.83%) subsidiary Google continues to dominate the U.S. search ad market, but Amazon (AMZN 1.41%) keeps chipping away at Google's lead. The e-commerce company's ongoing push into advertising is why Google former CEO Eric Schmidt once famously said that Google's biggest competitor was Amazon, which is expected to generate a whopping $11 billion in ad revenue this year, according to eMarketer.

The bulk of that will be search ads.

Worker loading Amazon boxes onto a conveyor

Many product searches now start on Amazon, not Google. Image source: Amazon.

Skipping Google and going straight to Amazon

eMarketer released fresh estimates this week on the U.S. search ad market, which is forecast to grow 18% in 2019 to $55.2 billion. Google will easily grab the majority with 73.1% of the market, while Amazon should trail as a distant No. 2. with 12.9%. Microsoft is expected to garner a 6.5% share; Amazon overtook Microsoft last year as the No. 2 ad platform in the U.S.

Chart showing U.S. search ad market share

Image source: eMarketer.

"Polling suggests that most product searches now begin on Amazon, causing the No. 2 search player to grow rapidly and steal share from its larger rival (though it is much smaller in comparison)," eMarketer writes. "In 2019, Amazon's search business will grow nearly 30% over last year, boosting net search revenues to $7.09 billion."

In other words, search ads should represent nearly two-thirds of the total ad revenue that Amazon will generate this year. It's also worth noting that eMarketer is essentially echoing Schmidt's comments from years ago. "People don't think of Amazon as search, but if you are looking for something to buy, you are more often than not looking for it on Amazon," Schmidt had said back in 2014.

Search ads for products are such a lucrative business for Google precisely because purchase intent is strong and Google knows exactly what you're looking for, but now consumer behavior is shifting in a way that cuts the search juggernaut out of the loop.

Amazon's search ad business will grow another 30.7% in 2020 to $9.3 billion, followed by another 26.2% jump in 2021 to $11.7 billion, according to eMarketer's forecast.

Chart showing eMarketer's forecast for Amazon's ad revenue through 2021

Image source: eMarketer.

"Amazon's ad business has attracted massive increases in spending because advertisers can reach consumers during product queries, a time when they're ready to buy," eMarketer analyst Nicole Perrin said in a statement. "Amazon has also rolled out better measurement and targeting tools, making it even more attractive for advertisers."

North America still represents the bulk of Amazon's advertising business, but the company sees a lot of growth potential abroad as it makes those tools more broadly available. "A lot of the [advertising] tools that we've rolled out introduced in places like the United States aren't available in many of the international regions," Amazon head of investor relations Dave Fildes said in July.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned, Inc. Stock Quote, Inc.
$107.71 (1.41%) $1.50
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,139.32 (-1.83%) $-39.94
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,149.80 (-1.72%) $-37.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.