Amazon dominates online shopping, cloud computing, and now, it has its sights set on advertising.
The online shopping giant has been quietly beefing up its ads business in recent months, and Wall Street is starting to take notice.
An analyst at Morgan Stanley predicted this week that the company could pull in $5 billion in ad revenue by next year. For context, that’s more than twice Snapchat’s forecasted revenue for that year and about half of Twitter’s entire market value at the moment.
That number could swell to $7 billion by 2020, according to the research note. Even so, Amazon would only make up a 4-percent share of the digital ads market, which is dominated by Facebook and Google.
Another analyst at BMO Capitals pegged that number at a slightly more modest $3.5 billion next year. But the bank noted that Facebook and Google should absolutely be nervous about Amazon’s growing clout on their turf.
That’s because advertising online is both about attracting eyeballs and understanding where they’re coming from. Amazon has been logging away massive amounts of data on its customers’ shopping habits for years, and it rules the e-commerce market.
And as much as they have tried, Facebook and Google have never been able to turn their platforms into shopping destinations people still leave their sites when they actually want to buy something. Amazon doesn’t have that problem.
BMO’s Daniel Salmon summarized that appeal succinctly:
While Google knows what people are searching for and Facebook knows what people are interested in and who they are connected to, Amazon knows the specific products that customers are purchasing and how frequently they are purchasing these products.
To punctuate his point, Salmon also downgraded his outlook on the stock of Google parent company Alphabet. He thinks Amazon is already eating into the company’s revenues, and it represents a bigger threat than the current advertiser boycott the search giant is facing over offensive YouTube videos.
Adding to the pile-on was NYU Stern School of Business professor Scott Galloway, who told CNBC that the company is already becoming a more important search engine than Google.
“[Amazon is] the most disruptive company in the largest economy in the world,” he told the financial channel.
Sentiments like these have rattled the advertising world lately as the industry begins to register the threat posed by Amazon’s ambitions. Martin Sorrell, head of WPP, the biggest traditional advertising company in the world, said on an earnings call last month that the e-commerce company was his number-one fear.
Perhaps rightfully so.