If you're anything like me, you make more and more purchases from Amazon as time goes by. I don't own a car, and the convenience of having items delivered to my door is hard to beat. This is especially true with Amazon Prime because I don't have to pay for shipping, so buying bulky items like diapers for my daughter is much easier from Amazon than it would be to buy them at the drugstore and lug them home.
With millions of customers just like me, Amazon has a wealth of consumer information. Earlier this year, Amazon was described as a "sleeping giant" in the online advertising world. While Google and Facebook know what you search for and what interests you have, Amazon knows what you have bought. Although online advertising is highly competitive, the margins are much higher than Amazon's retail margins. The high margins combined with Amazon's consumer information data makes this a lucrative opportunity for Amazon.
Amazon began displaying ads on third-party websites in late 2010, and in 2012 it christened this service Amazon Advertising Platform. Researchers estimate that its advertising revenue was $609 million in 2012. This is only a fraction of Google's $43.7 billion in advertising revenue, and it is still well short of Facebook's $4.28 billion. Indeed, it is small compared to Amazon's $75 billion in retail revenue. However, Amazon is just getting started in the online advertising business, and it has potential to become a major player.
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