Never one to shy away from a potentially lucrative new revenue stream, Amazon.com is reportedly looking at expanding its push into the $129 billion digital advertising market.
The report comes from Bloomberg, which said Amazon is testing a new service that involves selling video advertising spots on its smartphone shopping app. The website cites people familiar with the plan as saying the company has been testing the service on Apple Inc.’s iOS platform for several months already.
Bloomberg said the idea is to generate more revenue for Amazon’s advertising division, which is currently focused on selling ad space that features brand logos and product photos. The company also allows sellers on its marketplace to pay to see their products displayed more prominently in its search results.
The new video ads will also be shown in response to user searches, but only on its mobile app, Bloomberg said. Advertisers will need a pretty big budget to take advantage of the offering, since Amazon is said to be demanding a minimum of $35,000 in order to run ads at 5 cents per view for 60 days.
That might seem like a lot, but advertising doesn’t come cheap. Indeed, eMarketer predicts that companies will spend almost $16 billion on video ads alone this year as such content becomes increasingly popular among smartphone users.
Amazon already commands 6.8 percent share of the global digital advertising market, and that will likely grow to 8.8 percent this year, Bloomberg said. Google LLC remains a much bigger player, however, dominating the digital ads sector with a 38.2 percent share of the market in 2018.
Analyst Holger Mueller of Constellation Research Inc. said Amazon’s push into advertising makes sense on “too many fronts to count.” For example, Amazon is the world’s largest online retailer and continues to grow. There’s also the opportunity of integrated e-commerce, and then there are Amazon’s streaming services and its mobile and assistant devices to consider, he said.
“This is more about providing advertising opportunities to third parties, with Amazon owning the platform,” Mueller said. “The reality is that advertising is a platform business and the AWS cloud is the platform for this. That means load and better utilization, which leads to better economies of scale and fuels the Amazon flywheel.”
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