Amazon Expected to Make Gains on Google in Advertising
The battle for the future of the smart home might also be the end game for the future of advertising. With Facebook all but irrelevant there, the likely scenario is Amazon vs. Google. This is what we are seeing with Alexa devices vs. Google Home (Google Assistant) smart speakers.
Amazon is ramping up its advertising business and its ad spend. If Google’s Ad revenue doesn’t continue to pivot to TV and monetizing YouTube better, it could in the next decade fall to Amazon.
While there’s no doubt Google and Facebook have a stranglehold on digital advertising today where Google is a colossus in the U.S. digital advertising sphere, amassing around 37 percent of digital ad budgets this year — Amazon is strategically better positioned to disrupt the market.
This is because Amazon has a direct relationship with consumers and an ecosystem of value, convenience, speed and myriad products including hardware and Alexa-integrated ones. Millennials trust Amazon and GenZ have grown up shopping and watching Amazon (Yes, Twitch is really a thing). If Amazon acquires Snapchat or Doordash, it’s only further cementing its unparalleled ecosystem of innovation. Alphabet is putting too much money on the table for Amazon to ignore any longer.
CNBC’s ad industry sources report that some advertisers are moving half of their search budget from Google to Amazon. It makes sense since many consumers start searching on Amazon and not Google. Google’s recent Google + Plus cyber security incident doesn’t exactly help their case. In China, BAT companies are also targeting their Ad businesses more and are seeing tremendous growth. Alibaba has taken an early lead in smart speakers for Asia, while Tencent is going through a transitional year with Ad revenue gaining steam.
Amazon needs to set its sights on the 88$ Billion Ad market. After AWS, Prime and Alexa, Amazon needs more revenue to drive into markets such as Healthcare, banking, robotics and Biotech, among others.
Basically, what we’re witnessing in Q4 of 2018 is a changing of the guard, where the digital Ads duopoly is showing significant weakness. Consumers are realizing Google and Facebook might be more in the past than representative of the future of human technology.
In the free market, betting on Amazon vs. Google and Apple is starting to make more sense with each year. Apple, Facebook and Google have failed in a pretty significant way to keep up with Amazon in the smart home, entertainment or consumer ecosystems that can scale further.
Prime isn’t just an Amazon customer-centric bundle of experiences that help discount retail, it’s the next wave of advertising. So Prime customers — who pay $119 a year for access to free shipping as well as streaming music, video and discounts — are indeed like the NY Times suggests, one of the most likely and valuable places ads can be seen where they didn’t exist before. Amazon tracking will make Facebook and Google seem like amateurs.
Brands aren’t stupid, who notices ads on Facebook or Google in 2018? So what’s essentially happening is some brands are moving 50 to 60 percent of their Google Search ad budgets to Amazon. That’s like giving Jeff Bezos a ticket to outer space, literally. Innovate or die, Mark. Innovate or die, Google. Both are losing battles they could have won.
Amazon’s growing success could pose a rare threat to Google parent company Alphabet which generated $95.4 billion in ad revenues last year, 86 percent of its total revenue. (CNBC)
Amazon will likely be a major player in grocery delivery and even physical retail as they roll out new brick-and-mortar concepts like Amazon 4-Star and scale AmazonGo hybrid fast urban shopping experiences; but their assault on Advertising could actually be even more impressive.
Alphabet’s problem is that search Ads are outdated and consumers really don’t care about them. Alphabet does not disclose the breakdown of its ad revenue; most estimates have the vast majority coming from search ads — approximately 83 percent in the year to date, according to research from eMarketer. Brands have been wasting $millions of dollars, when the next era of advertising may not be in apps at all. The smart home and voice assistants will be far more personalized than web based searches ever were.
Advertising needs to pivot, but it’s not doing so with Google and Facebook at the helm. So it will need new champions to create more user-friendly models and interfaces of how the attention economy will work for brands in a more rewarding way. Google might have a lot of talent but it’s just an advertising business, with glimmers of consumer-AI and hopefully autonomous vehicles with Waymo. Amazon, on the other hand, is becoming a bigger part of our lives each year.
Between 2018 and 2025, Amazon is expected to significantly encroach on the Duopoly, Google and Facebook, which make up more than half of the $88 billion digital ad market. Amazon Alexa will become even more ubiquitous. Amazon in this time will make inroads into healthcare and probably banking. Google and Facebook are stuck, they make the majority of their profits in an increasingly outdated model of how digital advertising used to work.
While Google struck lucky with its YouTube acquisition, let’s remember Google didn’t build it. Facebook’s greatest hits have also just been acquisitions. These companies don’t have the DNA of Amazon. Google search appears to be flattening and advertisers are finally waking up and literally moving parts of their ad spend from other media to different Google properties, particularly to YouTube. Amazon Prime Video is expected to challenge Netflix by 2025. Apple, Google, Facebook and even Walmart are late to the party.
Facebook and Google can build cash cows, but that doesn’t mean they are building the future.
If I’m going to Twitch, IMDB, Amazon Prime, talking with Alexa, that’s where I’d notice Ads most relevant to me. Not on legacy utilities like Google or Facebook.
With consumer trust at all-time lows with Facebook and Google, people love Amazon because it serves their needs and not just profits. Brands need to see value from Ad platforms and not just greed. Increasingly Amazon’s ecosystem is where they will find that value and not in dying apps or outdated algorithmic systems of search. Welcome to the new wave, a world where Amazon can disrupt Google.