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Significant Shift From Google to Amazon for Many Advertisers’ Search Budgets

Some marketers are transferring up to 60% of their search budgets from Google to Amazon, a massive indicator of the company's ad growth. By IT October 16, 2018
Significant Shift From Google to Amazon for Many Advertisers’ Search Budgets
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Amazon is on track to more than double its U.S. digital advertising revenue by year-end, according to an eMarketer report which forecasts that the company’s ad revenue will total over $4.6 billion. This growth marks Amazon as contender number three when it comes to the digital ad market, falling short only to Google and Facebook. One stipulation to note is that a main reason that Amazon’s ad revenue is illustrating such drastic growth is because of an accounting change, effective January 1, 2018, under which the company’s ad services are now classified as revenue rather than cost of sales. However, organic growth for the company’s ad arm is still playing a role.

It was recently announced that some marketers are shifting up to 60% of their search budgets that typically get allocated to Google toward Amazon, a transfer of capital that represents hundreds of millions. The majority of executives at the agencies that are moving search budgets requested anonymity, as they are not authorized to discuss their clients’ spending in public. A representative from global media agency Havas Media told CNBC that 20-30% of the agency’s clients are shifting anywhere from 50-70% of their total search advertising budgets to Amazon.

According to estimates from eMarketer, approximately 83% of year-to-date ad revenue for Alphabet, Google’s parent company, comes from search ads. If this migration carries into 2019, it is possible for that percentage to decrease over time. CNBC spoke to a Google ad sales representative who anonymously said that he isn’t seeing a massive shift toward Amazon, but is seeing marketers create new, separate brands to sell exclusively on the marketplace.

For the advertising firms that are shifting money to Amazon, the majority of products seem to fall in the consumer packaged goods category and less so in other advertising-heavy categories such as automotive, travel, and some entertainment. Many agencies said Google is pushing its other ad products, particularly video ads on YouTube. Amazon’s frictionless end-to-end customer experience and access to customer purchase data and behaviors set the company apart from the duopoly of Google and Facebook, making it an obvious choice for advertisers who want to be on a platform where the end result is a conversion.

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