May 21, 2019

The Amazon Selling Machine

“What if there was a company that knew what you wanted to buy before you did? What if it made shopping recommendations that tapped into your deepest desires and wants? Better yet, what if it then made buying completely seamless? Would you ever stop shopping?

Amazon shareholders may like the answers to those questions. The company that revolutionized the way we buy has now gotten serious about selling the ads that tell us what to buy in the first place. It is selling advertising on Amazon.com, encouraging brands to create Alexa skills so they can market to people when they’re at home, and putting targeted ads on the main screens of its Amazon Kindles, tablets, and televisions. And it’s attracting money that brands used to spend on Facebook and Google.

On Thursday, Amazon reported that the category of its business devoted to advertising and “sales related to our other service offerings” made nearly $2.5 billion in net sales in just the third quarter of 2018. In the third quarter of 2017, it made less than half that, $1.12 billion. A September report from eMarketer estimated that Amazon is now the number three digital-ad seller in the country, behind Facebook and Google. Brands will spend $4.61 billion advertising on the Amazon platform this year, the report estimated. Mike Olson, an analyst with PiperJaffray, anticipates that Amazon advertising revenue will reach $8 billion this year, a number that will double to $16 billion by 2020, and that will soon overtake in profitability Amazon’s big moneymaker, Amazon Web Services, which sells cloud-computing services.”

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