Amazon eating into Google’s web ad dominance

Amazon’s loyal legion of shoppers is providing an audience that advertisers are finding hard to ignore.

Amazon’s ability to connect a customer to a purchase is key for advertisers. Picture: Bloomberg

Advertisers are starting to shift spending on search ads from Alphabet’s Google towards Amazon.com, a sign of how the online retailer is capitalising on becoming the top destination for consumers’ product searches.

WPP, the world’s largest ad buyer, spent about $US300 million ($421m) on behalf of its clients on Amazon search ads last year, and about 75 per cent of that money came from Google search budgets, according to sources. It spent between $US100m and $US150m on Amazon search in 2017, the sources said.

WPP spent more than $US3 billion globally on Google search advertising last year, one of the sources said.

Omnicom, another Madison Avenue giant, said between 20 per cent and 30 per cent of the dollars its clients spent on search advertising last year went to Amazon search ads, with the majority of the cash shifted from Google search budgets. The New York ad company spent about $US1.2bn on US search ads last year, according to sources.

Amazon still has a long way to go to catch Google, which had 78 per cent of the $US44.2bn US search-ad market in 2018, according to research firm eMarketer.

But the shift in spending follows a major change in shopper behaviour: While Google has long been the dominant player in online searches of all sorts, some 54 per cent of people looking for a product now begin their search ­directly on Amazon, a jump from 46 per cent in 2015, according to Jumpshot, a research firm that collects data from 100 million devices.

“Consumers are no longer double-hopping between Google and Amazon, they just go straight to Amazon,” said Scott Hagedorn, chief executive of Omnicom Media Group North America, the ad-buying division of Omnicom.

The search-ad dollars shifting to Amazon were from companies that sold products on its platform, such as consumer packaged goods manufacturers and retailers, Mr Hagedorn said.

Google and Amazon declined to comment.

The eMarketer firm doesn’t have a precise figure for Amazon’s search-ad revenue or how much it has increased, but estimates it will account for at least half of Amazon’s $US11.3bn in overall ad revenue this year.

That would mean Amazon would take the number two slot in US search advertising, vaulting substantially ahead of Microsoft, which is expected to have 6.7 per cent of the market this year.

Spending on Google search ads continues to grow and is expected to be up 17 per cent this year to $US40bn, according to eMarketer. However, Google’s market share is expected to slip to 71 per cent by 2020 as Amazon grows, according to the research firm.

Ad agency executives said Amazon’s strength was its ability to tell advertisers if their ads had led to purchases on its site.

“The shift from Google to Amazon search is simple; Amazon has the audience, the transaction, and the loyalty to Amazon Prime, which clients can capitalise on,” said Shane Atchison, CEO of North American operations at WPP’s Wunderman Thompson.

Amazon’s advertising ambitions have steadily grown. Beyond search, it offers other opportunities for marketers including display ads, TV-like ads in live sports telecasts and targeted ads it serves to people as they travel around the web. Overall, it is now the third-largest digital ad player behind Google and Facebook — the ­“duopoly” that combined controls about 60 per cent of US online spending.

Search ads on Amazon are called “sponsored ads”, and companies bid in an auction-based system to have their product ads show up when a person types in a search term like “shampoo”.

Men’s grooming product maker Oars + Alps was using Google search ads last year but has shifted most of its search-ad spending to Amazon. Its monthly ad outlays with Amazon now top $US20,000.

“I was amazed at the return on ad spending on Amazon, so I lowered our spending in Google search,” said Laura Cox, co-founder of Oars + Alps, which sells its products at Target, Amazon.com and on its own website.

Ad executives said money for increased spending on Amazon search ads was also coming from other ad and marketing budgets, including in-store promotions and ads, and display ads.

Dentsu Aegis Network, another major ad buyer, said its Amazon search-ad spending in the US increased upward of 60 per cent last year but only a small portion of the money was likely to have come from budgets previously earmarked for Google.