Amazon is an amazing company that has dominated the
e-retailing landscape and successfully moved into adjacencies like groceries
and cloud services. During its meteoric rise, investors have made Amazon one of
the most valuable companies in the world. But despite all of this, there is one
area where Amazon has not been particularly successful: profitability. Over
the last five years, Amazon’s average profit margin has been only about 1
percent.
Amazon believes that online advertising may be the cure for
their profitability woes. Amazon has slowly been building out a marketing
platform that will let it take advantage of – and profit from – the massive
audience that flocks to its website every day. And unlike the e-retail side of
the business with small margins and massive logistics capital investments
required, advertising is incredibly high margin. With little cost and capital
required, advertising can enable Amazon to finally push up its profit margins.
Advertising on Amazon could change the game for marketers.
Amazon has a captive audience of millions of users who – at that very moment –
are looking to make purchases. This makes the advertising “real estate” on
amazon.com highly valuable, and potentially a game changer for digital
marketing.
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