Amazon’s ad revenue is on track to more than triple in the next couple of years, according to Piper Jaffray.
For the past few years, Amazon’s ad business has often been talked about as a sleeping giant. Well, the giant is awake and ready to stretch out.
Amazon’s advertising business is just getting going, say analysts. A note to investors from Piper Jaffray finds that advertising will surpass the company’s juggernaut cloud computing business.
“By 2021, we believe it is likely that advertising operating income will exceed AWS [Amazon Web Services],” analyst Michael Olson wrote Monday. Olson expects advertising income to reach $16 billion in 2021 compared to AWS at $15 billion.
Amazon’s dominance in product search is driving the growth. “Being the world’s largest product search engine has its advantages and Amazon is starting to leverage them,” wrote Olson. Amazon sellers and customers alike will notice the increasing prevalence of ads in the search results on Amazon.com that drive users to product detail pages on the platform.
There are more than 5 million sellers on the platform, all vying for visibility and sales. Amazon took a page from Google’s playbook. Advertisers selling on Amazon can buy keywords related to their products and reach users as they are searching on the platform. Leveraging query intent with ad formats that include product images and ratings and that link right to the merchants’ product detail pages has set Amazon’s ad business on a path to rapid growth.
Amazon doesn’t report on advertising directly, but its advertising business makes up the majority of what it reports in its “Other” segment. That segment has been growing steadily over the past year, topping $2.2 billion in the second quarter of 2018. In 2017, Amazon reported a total of $4.65 billion in “Other.”