Amazon To Take Bite Out Of Google’s Digital Ad Business

Amazon is testing out a new display ad offering that will allow merchants selling on the site to buy spots that will follow shoppers around the web to get them back to Amazon to make a purchase.

According to Bloomberg, this move can have a direct impact on the multibillion-dollar revenue streams at Google and at firms like Criteo SA.

Amazon is inviting select merchants to test the new ads, which will allow sellers to bid on ads that will appear on other websites and apps. The merchants will only pay the eCommerce giant when customers click on the ads.

The company says the new tool will help merchants target shoppers who have viewed their products or similar ones. The invitation doesn’t specify which sites or apps will carry the ads placed through Amazon.

Right now, merchants can buy other types of ads on Amazon, and the company gives prominent placement to sponsored product spots in its search results. Last year, Amazon’s ad business generated $1.7 billion in revenue.

By comparison, Google brought in $95 billion from all ads last year, and UBS estimates its display ad network will reach $38 billion in revenue this year. Facebook made $40 billion from ads in 2017.

But earlier this year, BMO Capital Markets reported that a thriving advertising business will aid Amazon in 2018 — so much so that BMO raised its price target on Amazon’s stock to $1,600 from $1,200.

“We believe the emergence of Amazon’s advertising business can support both margin and multiple expansion and could be a greater catalyst for the shares if management shares more data points like it did for Amazon Web Services,” BMO analyst Daniel Salmon wrote. “The end result is greater confidence in the company’s advertising opportunity and an increase in our estimates.”

Salmon added that Amazon has an $18 billion revenue opportunity, thanks to sponsored product, headline search and product display advertisements.