Amazon Surpasses 10% of U.S. Digital Ad Market Share

Amazon’s U.S. ad revenue last year grew to $15.73 billion, up 52.5% from 2019, eMarketer estimates.

The company’s U.S. digital ad share is still small relative to Google and Facebook’s, which accounted for 28.9% and 25.2% of the business, respectively, in 2020, according to the report.

But Amazon is quickly becoming a viable competitor. It is expected to make up 10.7% of the U.S. digital ad market this year, growing to 11.9% in 2022 and 12.8% in 2023, eMarketer predicts.

Even though the uptick is bolstered by a drastic shift to digital shopping habits during the pandemic, it will likely stick, said Nicole Perrin, a principal analyst at eMarketer.

“This is one of these situations where the pandemic accelerated something that was happening anyway,” she said. “We are expecting pretty notable continued gains in share through at least 2023, specifically looking at the search side.”

The company, while stealing a slice of the market from the so-called duopoly of Google and Facebook, is also likely benefiting from a reallocation of budgets earmarked for traditional shopper marketing, Ms. Perrin said.

Nearly 90% of Amazon’s ad revenue was driven by ads that appeared on the company’s e-commerce platform, with search ads for sponsored products and brands accounting for a large percentage of that revenue, the report says.

The company generates a smaller portion of ad revenue on its properties—such as Fire TV, a streaming media player, Twitch, a live streaming platform for gamers, and IMDb TV, an ad-supported streaming service—as well as from ads sold through Amazon’s advertising technology to run on other platforms.

Searching for share

Amazon’s search ad business alone will grow to $14.53 billion in 2021, bolstering its share of U.S. search ad spending to 19%, up from 13.3% in 2019. Google, by contrast, is expected to account for 56.8% of the U.S. search ad market in 2021.

The company is taking much of its share from Google, whose cut of the digital ad business in the U.S. is expected to decrease from 28.9% in 2020 to 26.6% in 2023, according to the research firm.

“You can see Amazon gaining share, Google losing share, and Facebook stable and gaining a tiny bit,” said Ms. Perrin, referring to the companies’ share of the overall digital ad market. “A big reason for that is Facebook isn’t doing search ads and that’s where Amazon is really competing.”

Upcoming changes to digital ad targeting, driven by Google, will also likely fuel an increase in ad spending with e-commerce channels, she said. The changes, which will make it more difficult for advertisers to target individuals and measure the impact of their ad campaigns, have inspired brands to invest in so-called first-party data that they or others collect directly, including purchase data. Brands may also increasingly turn to retailers that can tell them whether their campaigns led to a sale.

“Not only did it accelerate during the pandemic, but it’s growing really fast for a segment as large as it is,” Ms. Perrin said, regarding e-commerce ad spending. “There’s really building interest in this.”

Write to Alexandra Bruell at [email protected]