Amazon’s digital advertising business is growing faster than Facebook, Google and Snap

Andy Gacy, Chairman and CEO, Amazon.Com Inc. , at the GeekWire Summit in Seattle, Washington, USA on Tuesday, October 5, 2021.

David Rider | | Bloomberg Getty Images

Social media giants Meta and Kasper are telling investors that the online advertising market is turbulent due to the economic downturn. Amazon is sending a completely different message.

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Alors que la majeure partie de son activité provient du commerce électronique et du cloud computing, Amazon a construit un division robuste de la publicité en ligne en incitant les marques à payer beaucoup d’argent pour promouvoir leurs produits sur le siteplication Web et l’ap company.

At the end of last year, Amazon controlled 14.6% of the US digital advertising market, third after Google with 26.4% and Facebook 24.1%, according to Insider Intelligence.

In the second quarter, Amazon grew faster than any of its larger market peers and outperformed the rest of the major players as well. Amazon’s advertising revenue rose 18% from the previous year to $8.76 billion, beating analyst expectations and highlighting the unit’s rapid rise and growing importance to brands.

In contrast, Facebook ads fell for the first time ever, below analyst estimates, and the company expects a second consecutive decline in revenue in the current period.

Here are the growth rates in descending order of the best online advertising platforms.

  • Amazon — 18%
  • snapped —13%
  • Google – 12%
  • Pinterest – 9%
  • Twitter — 2%
  • Facebook – (1.5%)

It wasn’t just social media companies denouncing the harsh advertising environment. Streaming service Roku reported disappointing second-quarter results and said in a letter to shareholders that the current advertising market is reminiscent of the start of the Covid-19 pandemic, “when marketers prepared to face macroeconomic uncertainties by rapidly reducing ad spend across all platforms.”

Meanwhile, Amazon reassured Wall Street with its third-quarter revenue growth forecast from 13% to 17%. This will be a boon for the advertising department, said Andrew Lipsman, analyst at Insider Intelligence, where “the advertising business goes like a business.”

“In the long run, I think Amazon is building absolute advertising power,” Lipsman said. “This engine will transform advertising.”

Amazon has a distinct advantage over many social media platforms that have struggled lately. In 2021, Apple’s iOS privacy change made it difficult for ad-supported sites to track users, a move that had a huge impact on Facebook and Snap. Amazon, on the other hand, is its own separate silo, where advertisers go directly to build campaigns.

Lipsman said companies worried about a potential recession are allocating more of their advertising budgets to places like Amazon, where they are more likely to see a return on investment.

“It’s a journey to safety for ad dollars right now, and that safety is when you can show measurable returns on ad spend,” Lipsman said.

The potential for ads to lead to direct sales drives a lot of Pinterest’s current strategy. The company invests heavily in e-commerce and recently appointed former Google chief of commerce Bill Reddy as its new CEO, succeeding co-founder Ben Silberman.

Justin Patterson, an analyst at KeyBanc Capital Markets, said there are signs that Pinterest has had some success in e-commerce and that “its algorithms helping people discover contacts or discover items on Pinterest to make their purchases are also improving.”

Pinterest’s revenue slightly missed analyst estimates and the company also released a disappointing single-digit growth forecast. But the stock rose 12% after activist investor Elliott Management revealed that it is the company’s largest shareholder and said, “Pinterest is uniquely positioned in the advertising and shopping systems.”

Despite all the slowdown in the broader online advertising market, Kate Scott Dawkins, global director of business intelligence at media investment firm GroupM, sees plenty of reasons for optimism. Meta, Facebook’s parent company, is still making a lot of money, and while social media platforms haven’t seen the kind of booming growth they’ve seen during the pandemic, they’re still getting the attention of top advertisers, she said.

Scott Dawkins said that brand awareness is important to companies in the consumer packaged goods industry and beyond, regardless of the current economic environment.

“We’ve heard from FMCG brands in the past about the importance they place on advertising and brand advertising during a recession, only to continue to ensure consumers choose their own brand rather than a generic brand,” she said.

The big question will be whether consumers cut back on spending as the year progresses, which could have a deeper impact on companies’ advertising budgets. If so, Amazon could still get some share, but in a market with fewer dollars to spend.

hour: Big tech paints an ugly picture of the US economy.

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