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A Foolish Take: Amazon Is Catching Up to Google in Search-Based Ads

By Leo Sun - Nov 4, 2019 at 12:00PM

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Forget Facebook -- Amazon could be the biggest threat to Google's search engine.

Alphabet ( GOOG -0.87% ) ( GOOGL -0.68% ) subsidiary Google and Facebook dominate the U.S. digital advertising market. Google could claim 36.2% of that market this year, according to eMarketer, as Facebook grabs 19.2%.

In search-based ads, Google rules the market with a 73.1% share, according to a recent eMarketer report, but Amazon ( AMZN -1.38% ) ranks second with 12.9%. The firm believes Amazon's share will rise to 15.9% by 2021 as Google's slips to 70.5%.

Chart showing shares of U.S. search advertising revenue among Google, Amazon, Microsoft, Verizon Media, and Yelp

Data source: eMarketer. Chart by author.

eMarketer also expects Amazon's search business to grow nearly 30% this year and boost its search revenue to $7.09 billion, or 2.5% of its total estimated revenue. Amazon already surpassed Microsoft as the third-largest digital ad platform in the U.S. last year.

Amazon's advertising business is growing because most U.S. internet users start their product searches on Amazon instead of Google. The Seattle-based tech giant leverages that lead, along with its e-commerce muscle, to sell more ads.

Advertisers are drawn to Amazon because they can craft better-targeted ads with its shopper data while dealing with fewer privacy concerns than Google and Facebook. In short, Amazon's advertising segment could soon become a core growth engine alongside its e-commerce and cloud businesses.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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