Amazon is branching out further than many thought imaginable and business is definitely booming. Some advertisers are beginning to move more than half of the budget they would typically spend with Google search to Amazon ads, instead. With this change, it amounts to hundreds of millions of dollars, according to executives at multiple media agencies.
With Amazon’s growing success, a potential threat to Google’s parent company Alphabet is present, although the company generated $95.4 billion in ad revenues last year, which is 86 percent of its total revenue. Google is currently the dominant digital ad platform in the United States and brings in an estimated 37 percent of digital ad budgets in 2018.
Alphabet remains in the clear so far, and its total ad revenue growth even accelerated in the first half of 2018 compared to last year. It is also noted that not all categories will be making the shift to Amazon and that most of the movement is sourced from consumer packaged goods.
While Google and Amazon did not voice any comments, a manager in Google’s ad sales organization stated he has not seen clients shift search budgets to Amazon, but he has noticed many clients coming up with separate brands to sell on Amazon.
“Leadership is definitely concerned, but [it’s] not a huge threat right now,” this person speaking on condition of anonymity said. CNBC reports that execs at six media agencies also confirmed Amazon’s new advertising venture and the tech giant also became the third-largest U.S. digital advertising platform, trailing behind Google and Facebook.
While a manager in Google’s ad sales organization claims to not see many shifts happening, Chris Apostle, executive vice president and head of performance for North America at Havas Media, said his agency is seeing 20 to 30 percent of its clients shift 50 to 70 percent of their total search budgets to Amazon. Companies are beginning to discover that the more money they spend with Amazon, the more ‘accessories’ they can add as well including content or reviews that will help influence more sales.
“Over 90 percent of searches for products that start on Amazon end with a purchase, even though that user may end up on social channels,” agreed Apostle from Havas. “The bang for your buck is where people are ultimately going to buy.”
With more companies on the rise for advertisements, Google’s growth will get harder, even though the company is currently on top. “Google’s challenge is they have to find more money every year, and it’s harder and harder to find that in the ad business,” said Matt Mierzejewski, senior vice president and search capability lead at Merkle.
“They’re tweaking the search page, creating more automation, finding new retailers, and adding a lot of new ways as they try to edge out the next dollars.” Mierzejewski said Merkle is not seeing a shift in search budgets from Google to Amazon but that the total spending on Google is “flat.”