Amazon’s advertising business is now growing faster than its retail, cloud computing and Prime subscription divisions.
According to new data from FactSet Amazon’s “other” unit, made up almost entirely of its ads business, raked in $21 billion throughout 2020, up 47 per cent year-on-year.
The sharp rise in advertising revenues is closely linked to the increasing dominance of its vast online marketplace, seeing merchants invest in advertising to ensure their products feature prominently in search listings.
With just over one in 10 clicks resulting in a purchase, advertisers are understandably willing to pay extortionate sums to have their products featured in top spots such as “sponsored” listings.
Data from JungleScout suggests that advertisers often pay over $7 per click on the most popular searches such as “noise-cancelling headphones”, even if the customer doesn’t make a purchase.
This “pay-to-play” model has become a major point of contention for big brands as it allows advertisers willing to spend more to appear higher in searches even if a specific brand was searched for.
However as increasing numbers of retailers are forced to turn to Amazon to sell their wares as shops remain closed during lockdown, many are left with no choice but to purchase advertising.
According to a Feedvisor survey of more than 1000 major brands, the number advertising with Amazon has jumped from just 57 per cent in 2019 to a whopping 73 per cent this year.