Over the past couple of years, Amazon’s ad business has grown leaps and bounds and today Amazon is the third largest digital advertising company in the U.S.
The majority of Amazon’s ad revenue growth comes from opening new ad inventory to make the most of the huge amount of traffic on its online marketplace. But even supply gets proportional to the demand, Amazon has to explore new ways to boost revenue growth. That is usually done through a hike in average ad prices so that its ad inventory does not get restricted.
Even though there are other online platforms that offer ad products, sellers are most keen on advertising on Amazon than on other marketplaces like eBay (EBAY). 58% of Amazon sellers do not advertise outside Amazon with eBay accounting for only 17%. With 89% of the buyers keen on buying through Amazon only, the company alone had grabbed nearly half of all online sales in 2018. Its online sales grew 10% in the first quarter and sales from its third-party merchants grew even faster.
This was achieved even when Amazon sellers did not use any tools to optimize their ad campaigns. But if they did, coupled with an expansion of its ad inventory with things like ad-supported video, it should result in higher average ad prices on Amazon and drive growth for the business.