Amazon has another one oasis – advertising. We had formulated the one oasis strategy (PDF) on Amazon with AWS(Amazon Web Services) which was initially built to improve the ecommerce business before it became a money maker itself. Today, Amazon is growing a serious advertising business which will become a Fortune 500 company soon if it were a separate company.
Amazon’s advertising business is a brewing industry force, and ad buyers and competing retailers and platforms are only starting to come to terms with its weight in the industry.
Now worth $2.5 billion as of Amazon’s third-quarter earnings in October, an increase of 123 percent, Amazon advertising’s growth has turned the company into a soon-to-be rival of the duopoly, Google and Facebook. According to eMarketer, advertisers are forecasted to spend $4.6 billion on Amazon’s platform this year, which would give it 7 percent of market share. That’s a sliver compared to the market share of Google, at 37 percent, and Facebook, at 20 percent, but Amazon’s business is growing at a much faster rate. In the third quarter of 2018, brands’ ad spend on Amazon increased by 250 percent over the third quarter of 2017.
There is a reason Amazon ad business is doing well: Amazon advertising delivers better results than Google’s. If Amazon begins to automate that process at scale, it could pose a huge challenge to Google. When you search on Amazon.com, you are actually in the process of spending money. Google delivers traffics to websites of merchants; Amazon is delivering revenue in dollars to them. That is why this is exciting for this company, and investors like the Amazon Advertising vision.
Amazon is building a solid business using the one oasis strategy. This business will challenge the duopoly which currently exists between Google and Facebook. The advertising business, just as Amazon Web Services, is improving the ecommerce with the pay and play model: the more money you spend on advertising, as a merchant, the more you sell as your wares will appear on searches at the top. The Amazon search was originally created to make the ecommerce business better. Now, it is earning revenue because it has become an advertising business. Simply, this is the typical one oasis strategy playbook.
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