From Seeking Alpha:
Amazon is now ramping up its efforts to build out its ad business, which could be one of the most significant threats to Facebook’s and Google’s ad revenue they’ve ever faced.
At this time, Amazon doesn’t appear to be much of a competitor to online ad giants Google and Facebook, with Google generating over $79 billion in sales during 2016, and Facebook producing $27 billion in sales. But Amazon has proven once it has its foundation in place and a system worked out, it can rapidly scale new businesses. Cloud computing and the growth of Alexa are the most obvious examples.
Citing eMarketer, Bloomberg reported Amazon ad sales will climb by about 33 percent to $1.5 billion in 2017 and, by 2019, will jump to $2.4 billion. The short-term incremental growth isn’t what matters here, it’s what happens afterwards that’s important, and that represents a real risk to the online ad model of Google and Facebook, which are so dependent on them for growth.
If Amazon really goes after this market, it could be a major force that the two tech giants must figure out before they find themselves losing market share.
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In the past, Google hasn’t experienced much in the way of disruption from Facebook when it focused on the ad market, apparently because agencies and brands increased ad spend to expand their reach. It produced good enough results to justify the increase in spend.
With the mood of advertising changing to safer platforms, it bodes well for Amazon that it, at this time, doesn’t have what is considered unsafe or risky content brands are concerned about placing their advertising against.
What should be of great concern to Google and Facebook is a statement by GroupM’s global head of search, Edward Foster, who said agencies are shifting money away from paid searches on Google and Microsoft’s Bing and placing it on Amazon. That’s one side of the risk. As mentioned, the other is companies are looking for places they don’t have to face consumer backlash across various worldviews, which in the case of user-generated content on Facebook and YouTube in particular is a major problem.
The challenge for YouTube and Facebook is they would cease to be what they are if they were to overly monitor what people are sharing on the social networks. This is probably why both are seeking out alternatives to user-generated content by pursuing premium content that is safer and attracts higher ad spend.
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For now, it should be expected that those searching for specific products aren’t going to go past the first page of results, just as most don’t do so with Google or Bing search results. As a matter of fact, it’s almost always the first three results that attract the vast majority of interest and response from searchers.
With brands unlikely to cede the potential offered by Amazon, they are almost certainly going to spend on ads to secure a superior position than most of their competition. That means could possibly double its money from vendors that used to pay solely by a commission of about 15 percent; that could push them to spend as much as 30 percent on advertising and commissions with Amazon.
Link to the rest at Seeking Alpha