Amazon Ad Profits to Soar: Analyst

Posted on by Beth Negus Viveiros

Remember the days when Amazon was merely a massive online bookstore? We barely do either. While ecommerce and web services are clearly still a huge driver for the online titan, advertising revenue is a big part of the future.

This week, a note to clients of Piper Jaffray advised investors that by 2021, Amazon’s advertising profits will surpass its cloud computing income. “Amazon’s advertising business has been quietly growing into a massive driver of current and future profitability,” analyst Michael Olson said in the note, as reported by CNBC.

Olson estimates Amazon’s ad business operating income will grow to $16 billion in 2021 versus $15 billion for Amazon Web Services that year. Amazon is considered by many to be the world’s largest product search engine, and the company is leveraging that fact.

“Advertising will be a driver to watch, as the retail industry continues to live or die by the shift to direct-to-consumer,” Olson said. “Amazon, more than any other digital company, may have a direct line of sight on the multi-billion dollar ‘trade promotion/merchandising’ budgets of many marketers.”

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For many marketers, Amazon’s true purpose is still serving as a huge source of ecommerce traffic. Our sister site Multichannel Merchant offers several useful tips for increasing Amazon conversion rates, including how to make sense of Amazon’s algorithms, how to optimize keyword product titles, choosing relevant product names and improving seller feedback.

“With over 550 million products sold on Amazon, you must ensure that you maximize the opportunity for conversion for those customers who visit your page, so that they have no need to search and buy elsewhere,” writes Sergio Arboledas on MCM.




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