Google Ads versus Amazon Ads: Who Eats Who?

Some 12 years ago, I was point man for all European Google Ads spend for a large media agency group. At the time, our claim was to be the biggest spender on Google Ads. And whereas it didn’t provide us with any monetary benefit, kickback or commission, it did give us some prestige, some clout, and a few privileges. We were the number one revenue stream, after all.

Fast forward to the 2020’s: Amazon is the biggest advertiser in the Google Ads auction. My good friend Mike Ryan, calls it the “Elephant in the room”. When the elephant makes a turn, the room is shaking, and sometimes things are breaking.

In the midst of the pandemic, we saw signs of Amazon pulling its advertising on Google Ads. Whether all advertising was stopped or this was only partial or local, we do not know. What we do know is that it coincided with the first ever negative growth quarter in the history of Google Ads. There was of course a generalized drop in advertising spend across all media, but Google took the biggest blow. There must have been some painful video conferences taking place in that quarter.

Let’s not be carried away by that fact, however. With its 69% YoY growth in Q2 of 2021, Google Ads has recovered from the blow. It is also still 6-7 times bigger than Amazon Ads and almost double the size of Facebook Ads. It had been a while since Google Ads had experienced higher growth than Facebook which only reached 56% YoY growth this time around. Surely, this must confirm have been overseen by those thinking Facebook advertising has played its role out.

Pandemic turbulence

Are we through with the pandemic yet in Q3 of 2021? It doesn’t quite feel that way, but for sure, digital advertising has surfed the wave for 18 months at this point in time. Growth rates for Gogle Ads, Facebook Ads and Amazon Ads were 69%, 56% and 87% respectively in a year on year perspective for Q2 2021. All-time highs since 2018 for all of them. When we compare the sum of the three ad platforms’ revenue to the worldwide digital advertising spend estimated by Statista, they represent 75%. It is the rise of the triopoly. Digital advertising has indeed survived and recovered from the pandemic.

In my quarterly recap on the Triopoly of digital advertising, Google Ads versus Facebook Ads versus Amazon Ads, I dubbed Q2 of 2020, “Christmas in May”, as the seasonal spikes of Q4 was suddenly equaled by a Q2 spike in ecommerce which was a high as we would expect the end of year season. Would it all come back down? Had everyone now spent all their beer money? Not quite, the Q4 spike was back as well and a new pattern was showing.

Shifting budgets to retail media

We detected anecdotal evidence of a shift of budgets within the Google Ads mix in our research for the 2018 Paid Search Trends report. We believe this trend has existed for the past 10 years. Text ads budgets are shifting to Shopping ads. We could call this the rise of retail media, a term that has become popular alongside the rise of Amazon Ads.

I am tempted to give this a less flattering name, such as the tyranny of last-click attribution. Tracking on the internet becomes harder the further away from the measurable conversion you get. And conversion tracking has been one of the keys to the explosion of digital advertising. Comparatively, advertisers always favour last-click. It is easier to measure conversion on a marketplace than in an influencer campaign, but does that mean the marketplace is more important than the influence generated from reaching out to wider audiences?

A shift from Google Ads to Amazon Ads?

The biggest shifts in advertising budgets we are seeing are two-fold. Google Ads budgets are shifting to shopping internally. And Amazon advertising budgets are draining Google to feed its marketplace and consequently its own advertising offering.

Is this a story pattern that repeats itself? In the 1990’s, Google managed to sign a deal with the market leader for internet search, YAHOO! to provide the backfill for organic search results on the the catalog. This coincided with Google becoming a household name, and as we all know, the leading search engine is now Google and Yahoo! has all but disappeared.

Is Amazon draining Google and winning the battle of product search in the process by being such an omnipresent advertiser on the search engine? Or is it on the contrary Google which benefits from the surge of Amazon to monetize its huge covering?

Viewed from the trenches Google and Amazon are not substitutes

For large online retailers, there may well be a need to aim for native ecommerce in each available online media channel: provide a native ecommerce experience on Facebook and Google, just like the one Amazon provides. But for most merchants, the duality of Amazon and non-Amazon is a really complex setting to be in.

Seen from the trenches, Amazon is fast and dynamic, but merchants would much rather drive traffic via Google to their website where they can generate higher margins and a better client relationship in the long run.

Whenever I am in a discussion where both Amazon Ads and Google Ads are discussed, they are never seen as direct competitors for a budget line. They are separate universes an advertiser will consider strategically and in most cases want to address separately to get the best of both worlds. In some cases, Google Ads can also be an external advertising challenge for Amazon, something the ecommerce platform is incentivizing as of late.

Amazon Ads is booming but it would be wrong to say Google Ads isn’t. The big difference between the two is that retail media is growing at a much higher rate than search. Additionally, Amazon Ads has created an advertising product which merchants can hardly live without. That in itself doesn’t guarantee sustained future growth, but at the moment retial media and Amazon Ads are the winners of the day.

Native Ecommerce

Native Ecommerce will power the shopping craze of the 2020’s. Watch a film and be attracted by a dress the actress is wearing. Pause, click, purchase right there, then resume your film. See a designer watch in an influencers’ feed on Instagram, click, purchase and scroll along. Watch a start-up founders’ live demonstration of an innovative product and buy it on the spot. Native Ecommerce is the future of impulse buying. Making the user experience great again.

Native ecommerce is when then entire shopping process from product discovery to purchase and checkout happens natively on the same platform. Such a process is already native to Amazon, but in most other online purchase journeys online, you still jump to another platform when it comes to the final purchase of a product. This disrupts the user journey, puts tracking off and represents a monetization loss for the platform you left.

Over the past few years, industry observers have described a trend known as social commerce, whereby more and more of the purchase journey is integrated into social media platforms such as Instagram and Pinterest. Social commerce, however, is no longer the only type of native ecommerce on the rise. Native ecommerce is coming to most of your existing online platforms, changing the nature of the online purchasing journey and making ecommerce into a feature applicable to any existing platform. Facebook shops are accepting payment and Google now has a buy button which we will find in videos on YoutTube, on it’s shopping experience and even in search results. Every online platform is working to complete its’ range of features for online shopping so that you no longer have to click through to an ecommerce site or go over to Amazon to buy products. Stay put, native ecommerce is coming to you making shopping a feature of any online experience.

The Trinet and the compartmentalisation of the internet

Some will consider this trend of compartmentalisation of the internet a disturbing trend. It certainly wasn’t the way the internet was conceived to be. With the strong growth of Apple, Google and Facebook and the walled gardens they raise around their users, the internet of the 2010’s started to be called the trinet, as each of the three players were pretty much building their own internet and raising barriers around it to avoid users and data to flow between them. In these Data Wars, the end user has a seamless experience within each of those walled gardens, and an inconsistent one when the boundaries are crossed which is perfectly natural user behaviour. The marketers nightmare.

When I launch a Facebook or LinkedIn page, I am much less concerned about feeling blind. I am more concerned of being misled by the stats I receive from the platforms and not receiving the ones I am interested in. The first time business owners are confronted with the reality of their Facebook page can be a bit awkward. They have heard so much about all the data Facebook holds on users. Didn’t Cambridge Analytica have 5000 data points on each user thanks to data collected via Facebook? Then how come you can’t even know who the  fans of your business page are, and less so contact them?

You can access the data for marketing purposes. Show advertising to all your fans, to all the fans of your fans, to people in specific demographics, geographic segments, those interested in footwear, or those who are likely to buy insurance. Facebook has the most powerful targeting machine on the internet due to that user data, but you don’t get it, you can only rent it, even if it was built with your own contribution.

In the 2020’ies the compartmentalisation is much broader than a trinet. Most online platforms are using similar same techniques of impeding user leaks and blocking data flows. Amazon, Microsoft, Snapchat, TikTok. Each platform will penalize the distribution of content taking the users outside of their platforms and will impede most tracking of activity from any other platforms.

How tracking and data restrictions are reinforcing this trend

When I launch a new website I always feel entirely blind until an analytics tool such as Google Analytics is active. Imagine you opened a fashion retail shop and you would stand in the middle of the shop and not be able to see any of your visitors nor hear when the door opens. The only thing you could know would be when the till rings a new sale. People have come to hate cookies across the board but sometimes miss some of the essential things they help us do. Please don’t remove first party cookies! Please don’t block all cookies when you go to a website. Don’t prick out the eyes of the store owner!

On the expanded trinet, platforms don’t allow you to do any tracking on their own. You have no raw data, can’t extract it, can’t consolidate with any other platform data you may have. Don’t say you didn’t know, it was in the terms and conditions you accepted when you created your page!

If marketers could get their right, they would ask for tags to be placed on every page of their brand’s presence. These tags would allow them to understand how their marketing impacts end-users, and especially allow them to use automated optimization allowing for advertising to be efficient. But those signals are absent from any cross-platform advertising, except traffic sent to your own website.

The end of cookies is one of the big topics in our digital marketing report.

The opportunity for online merchants

Whereas marketers are struggling with this segmentation of the internet into closed circuits, it might actually provide an opportunity for online merchants because of the desire of each of these platforms to provide all the functionality necessary to complete a purchase.

It is already quite common to have an ecommerce website and an Amazon store in parallel. Merchants are managing the challenge of maintaining a catalogue in two places and driving traffic and optimizing each of them.

In order for such a dual approach to work, a number of opportunities present themselves to merchants:

• Maintain a single source of catalogue, for example by using a PIM (Product Information Management) tool, and upload the catalogue to each ecommerce channel.
• Optimize inventory and fulfillment, for example by using MCF (Multi-Channel Fulfillment) from Amazon whereby you hold one FBA inventory (Fulfillment by Amazon) and pass orders from other channels to Amazon

Being an omnimerchant is not something reserved for large ecommerce operations. The tools and processes are constantly improving to make this possible.

A blueprint for operating native ecommerce

In a small ecommerce set-up, a catalogue can be managed via an excel file. Perhaps taking a first step further and making this a shared online version would be a great idea. Google Sheets can do wonders. With one single source of the catalogue, each native ecommerce channel will be fed the same information.

For large catalogues, a product information management tools becomes necessary. It can maintain the latest product information and ensure consistency between channels.

For driving traffic to each ecommerce channel, the job of the marketer suddenly became much easier. For a Facebook shop, advertise on Facebook and Instagram, for a Google Shopping set-up advertise on YouTube and Google, for an Amazon store, no need to look for external traffic.

One of the big challenges for ecommerce has always been the checkout. This is where a large part of the current revolution is taking place. Google and Facebook are starting to do the checkout. Facebook probably even has its own currency on the roadmap. Other players such as TikTok, may move in the same direction dragging Pinterest and Snapchat with them. Payment on Google and Facebook is currently only possible in the US market, and in other markets, the solution may be an ecommerce solution such as Shopify allowing you to run your own ecommerce website and provide the checkout for Facebook and Google operations.

In the future, however, an ecommerce operation may not need a site. This changes the nature of a merchants’ infrastructure and budgeting.

Remains to be see whether agile ecommerce corresponds to what users want

The infrastructure for the omnimerchant is here. All the big marketing platforms are enabling native commerce and raising their walled gardens. The only ones who weren’t asked their opinion were the end-users. Do you really want to buy that dress in an instant while you are watching a film? There is an opposite trend of buying less, recyclying and sharing. Of giving it a good think before you do your purchase in order to not overconsume. And many users cherish their freedom, doing what they can to not be locked into the user journey the marketing platforms laid out for them.

Native ecommerce is definitely a trend, and it can bring efficiency to merchants, and consistency to marketing operations. But whether users will go all the way remains to be seen.

Growth of the triopoly

After every end of quarter, we feast on quarterly reports showing just how massive growth these three giants are consistently creating. The illustration below show the quarterly evolution of each of the three players’ advertising revenues. They peak in Q4 as advertising traces the end of year ecommerce peak. Therein lies the explanation for the success of these platforms – they drive sales. And they are able to demonstrate it in their reporting.

The only exception to the Q4 peak happened during the pandemic in 2020 where we had a “christmas in May” effect where consumers were in lockdown, spent hours behind their screens and started on accelerated their online buying.

Amazon Advertising grows faster

Amazon Advertising now represents 9% of the Triopoly and catches up a little more on its’ competitors for every year that passes. From a mere 3% of the triopoly in 2017 to 6% in 2018 and 2019 and now at 9%. Advertising spend picks up in Q4 as it traces the end of year ecommerce peak.

The largest share of Amazon Advertising is shown inside the marketplace itself. When ecommerce peaks, there is more ad inventory, and when ecommerce sales peak, so do advertising investments. Amazon Advertising grew at a staggering 77% in Q1 2021 compared to 2020. The ecommerce platform itself grew at around 40% and the advertising solution has shown its capability for generating a rate of growth well above the platform growth. This is easy to visualize when you look at the correlation between ecommerce and ads sales for Amazon.

Google has restored its health

In Q2 of 2020, Google Ads experienced its only ever negative growth in revenue for a quarter compared to the previous. However, the 32% growth YoY of Q1 of 2021 erases that dip. This growth level is the highest Google has seen since 2017.

Facebook advertising hits a 46% growth YoY in 2021, also much higher in recent years. This level of growth hasn’t been seen in Facebook since Q1 of 2018.

Digital maturity, hope and economic growth

The year of the pandemic was 2020. The world came to a halt. We stopped moving our feet and accelerated our online usage. For better and for worse. During that year, businesses accelerated their digital transformation like never before. Online shopping boomed like never before – it X-mas in May as we were bored, or replacing social interaction with online shopping. I think I ate disproportionately more chocolate than I used too out of self-pity. Or maybe that was when I started exploring exotic cocktails before dinner.

Now that we are expecting the end of the pandemic, businesses are investing, consumers have higer hopes, and we are expecting economic growth to take off and maybe recapture some of the lost growth of 2020. All of these factors are beneficial from an advertising point of view. If this trend confirms itself, we may be in for continued above-normal* advertising growth way further into 2021.

“Above-normal”. What is normal in 2021, anyhow?

The biggest and most important Amazon market is without a doubt the US market. It weighs 67% of revenues and grew by 19% in 2021. It will be a long time before any other market catches up. If ever! The three following markets: Germany, United Kingdom and Japan add up to only 20% of revenues. And the remaining 15 active markets 14%. Amazon is top-heavy despite a massive international expansion.

[the original article from 2021 has now been updated with 2021 numbers and developments]

The top four markets are directly accounted for in quarterly earnings report. The following five markets, India, France, Italy, Canada and Spain all had more than 150.000 sellers in their local Amazon marketplace according to this overview of third party sellers by country from Statista, and we checked their traffic and GDP per capita to build an initial list. When we initially shared this, we were made aware of actual measured figures which Edge by Ascential provides us with. To our surprise, India is actually the fifth biggest market ahead of France and Italy. For the tenth position, we initially bet on Brazil, but it seems it is Australia that holds that position followed relatively closely by UAE and Mexico.

Managing multiple marketplaces on Amazon

Navigating the various marketplaces can be complex on Amazon. And even more complex for ecommerce outside of Amazon. As the formats and functionalities of market places are essentially the same from one Amazon country to the next, there are a couple of practical solutions in place. In North America, sellers can set up a unified account to cover US, Canada and Mexico. And in Europe, a unified account spans Germany, the United Kingdom, France, Italy, Spain, Netherlands, Poland and Turkey. If you are looking to expand internationally, the Amazon’s Global Selling guide is your go-to destination.

Amazon’s international growth strategy

Amazon appears to have a distinct synergy-driven approach to internationalisation where new markets piggy back on existing ones, and where additional features are rolled out progressively. It is also using existing regional strongholds to build neighbouring markets, as proximity is so important to ensure high quality fulfillment. Brazil may enable an expansion into Argentina in South America in the future, and Germany was a key piece in the puzzle for opening Poland. In recent plans for opening in South Africa and Nigeria, those two are part of the same project, just as Colombia and Chile are grouped together.

There seems to be a fair amount of merchant copy and paste going on to get a marketplace up and running. Product listings are autotranslated and made available in a new marketplace to get it going. There must be both ample supply and demand for a market to function.

Once merchants start flocking to the marketplace, the advertising platform is then rolled out. And with the recent opening of the physical stores, Amazon Go in the UK, perhaps the physical stores branch will start trickling down the top market list in the future. Perhaps Germany, Japan, and regional strongholds such as India and Brazil will be next?

Let’s look at some of the ways Amazon markets are growing and how the international expansion strategy seems to be organized below.

Amazon Advertising

Advertising is one of the first powerpack added after a marketplace opens. There are four types of Amazon Advertising, three of which are intimately tied together with the marketplace:

• Amazon Sponsored Products (which we like to refer to as Amazon paid search due to its similarity with Google Ads)
• Amazon Sponsored Brands
• Amazon Sponsored Display

These three are used by merchants to fight competition on the marketplace and boost their sales. As described in our Amazon Marketing Report, these solutions form an integral part of an Amazon marketing system and have been opened to all the recent marketplaces.

Netherlands, Poland and Sweden are recently opened market places and the advertising branch has not yet been launched. Turkey has been around longer but it is characterized by a small Amazon market share.

The fourth advertising type is the Amazon DSP, the demand side platform allowing advertisers to advertise inside and outside the Amazon platform and a CPM (cost per thousand impressions) model. Amazon DSP could in principle be launched independently from the other ad types, but in practice it seems to tag along with the other types or shortly after.

Amazon Prime

We have a hunch that the roll-out of Amazon’s loyalty program, Prime, follows approximately the same pattern. In Europe, Prime was launched first in the UK in 2007, in France in 2008, Italy in 2010 and Spain in 2011. The trickle down pattern is probably similar across other markets.

What will be the next Amazon market to open?

In recent years, new market places have opened or absorbed in a number of countries: Turkey, Singapore, Saudi Arabia, Egypt, Netherlands, Poland and Sweden. And in a recent article for Business Insider, plans for further expansion were leaked with Belgium up next in 2022 and for next year the plan includes South Africa and Colombia and then Nigeria and Chile.

The launch plan for 2022 – 2023 goes like this according to Business Insider:

• Belgium – Sep, 2022
• South Africa – Feb, 2023
• Colombia – Feb, 2023
• Nigeria- Apr, 2023
• Chile – Apr, 2023

(source: https://www.businessinsider.com/amazon-to-expand-into-5-countries-by-early-next-year-2022-6)

Worldwide domination is still far away

Amazon is experiencing amazing growth, its ad offering is penetrating the triopoly of digital advertising consisting of Google, Meta and Amazon Ads. Physical stores are breaking down the barriers between online and offline retail. But when we look into the details of the domination, Amazon is very top heavy and has a long way to go before it reaches the same level of market power in worldwide markets. As we exposed in our recent report “State of Retail Media 2022”, local Amazons often face competition in the form of local pure players such as Allegro in Poland and Cdiscount in France. They also face vertical marketplaces such as Zalando in beauty and fashion or ManoMano in DIY.

It is interesting to note, though, how the constant progression of Amazon in international markets reinforces existing strongholds and markets as it goes. It may take a while, but the machine seems unstoppable.

If you are aiming to build a more full understanding of Amazon marketing, you find a complete coverage in Innovell’s “Amazon Marketing Report”.

This doesn’t mean you shouldn’t be counting on Google Ads and Facebook Ads.  It still makes me laugh a little when I hear people say “Facebook is dead” or when they are looking for “a Google killer”. With their Q4 ad growth of resprectively 22% and 33%, those are hollow considerations. Amazon Ads, however, has grown even more impressively at 66% in Q4 2020.

Whereas past years of quarterly fluctuations clearly indicated a peak in Q4, the COVID19 lockdowns in 2020 changed the landscape. There was an e-commerce peak in Q2 when the pandemic was at its first high, and the pattern of a strong Q4 was even stronger than usual. If there were ever a hockeystick curb to be trusted, it is the yearly e-commerce sales distribution.

The growth of Amazon Ads is around double the size of its e-commerce growth. Most of Amazon advertising happens via Amazon Sponsored Ads which are 100% internal to the platform. A less significant part is the Amazon DSP which also has the majority of its’ inventory inside the marketplace as well as on other Amazon properties such a s Twitch and IMDB, and finally a smaller proportion targeted outside of the Amazon univers via ad exchanges.

What is the most impressive about the growth of advertising, is that it has been consistently outgrowing the size of its media for several years. Perhaps the growth rate will have to slow down to come closer to the e-commerce growth rate, situated at 30-40%.

The triopoly in digital advertising composed of Google, Facebook and Amazon, now represent around 3/4 of digital advertising. Global advertising stagnated in 2020 according to Statista, but not for the triopoly which won marketshare. Within the triopoly, Amazon Ads is catching up on its peers. It represents around 29% of Facebook and 17% of Google Ads in Q4. Even at those impressive growth rates, it won’t catch up with them until some time in 2025, but it has firmly established its place in the media landscape moving forward.

In our recent report “Digital Marketing in a VUCA World” we looked at how digital marketing is affected by COVID19, the rise of AI and the end of cookies. The most abrupt changes are of course due to the lockdown and drop in advertising investment. Now, in Q3 we can see how each of the platforms recovered.

Amazon Ads grows 51%, Facebook Ads 22% and Google Ads 9% in Q3 ’20

Every quarter, the three members of the triopoly of digital advertising publish their revenue figures and it used to be almost predictable. An average growth every of around 15% year on year and a peak in Q4. Amazon Ads playing catch-up by steadily eating triopoly share every quarter but still representing only ¼ of Facebook Ads and 1/7 of Google Ads.

In Q2’20 Google Ads saw negative growth YoY

With COVID19, things were shuffled around a bit. Google Ads saw the first ever quarter of negative growth yoy in Q2 (-8%) whereas Amazon Ads and Facebook Ads resisted. But the recovery was so much stronger for Google Ads in Q3 that the lost quarter of COVID19 may be soon forgotten. Facebook didn’t seem to be impacted in Q2, and experiences higher growth than recently in Q3 (22%).

In Amazon, E-commerce exploded in Q2 and ads picked up in Q3

Amazon Ads grows with over 50% in Q3, a level of growth the platform hasn’t seen since 2018. It is probably riding on a delayed impact of the massive Q2 growth in e-commerce on the platform. Amazon Ads spend is strongly tied to the the e-commerce activity. On Amazon the media is the marketplace. When you plot e-commerce revenue against ad revenue over time, the correlation becomes very clear – all but in Q2 and Q3 of 2020 due to COVID19.

Amazon experienced massive growth of e-commerce in Q2 at 49% yoy compared to recent growth around the 20% mark, Q2 was a bit like christmas in May. However, advertising was affected by uncertainty and only picked up in Q3 with over 50% growth where recent quarters showed around 40% growth year on year.

Q4 outlook, anyone?

With a massive Q2 for e-commerce, recession, new lockdowns and an uncertain holiday season, Q4 shouldn’t be expected to be business as usua, should it?. Amazon, of course, pushed its Prime Day private sales event to Q4 and should be expected to benefit from a further surge in e-commerce. Advertising spend usually picks up strongly in Q4 too, so we have two contrary forces at work: high media pressure on one hand and uncertainty on the other. We are likely to see the traditional Q4 spike, but it will probably be composed of a different advertiser mix than we are used to, and there could be some platform shift also. One thing is certain. Q4 in digital advertising will be higher than ever before for the triopoly.

Amazon published its quarterly earnings report last week and I rushed in to discover the massive growth of Amazon Ads, which is the highest growing activity within Amazon. Amazon Ads increased by approximately 44% year on year and thus had slightly higher growth than in the last quarter as compared to the same quarter the year before.

I also made my way by the Google and Facebook quarterly reports to get a feeling for the state of the triopoly of digital advertising. Both are experiencing healthy growth: Google Ads grew 10% and Facebook Ads 17% YoY.

As, in the past, I have strongly insisted on the way Amazon Ads has been catching up on both Google Ads, of which it represented approximately 1/8 in Q4’19, and on Facebook Ads of which it represented almost 1/4 in the same period, I was curious to see whether the trend continued with the increase in growth we noted. To my surprise it was not the case. In Q1 2020, Amazon Ads dropped to a 11,6% of Google Ads and 22,4% of Facebook. A relative decline despite the high growth.

The explanation for this seeming paradox of higher growth but lower proportion, is that Amazon Ads have a higher seasonality than Facebook and Google. All the big internet players have an extremely high seasonality in the last quarter of the year due to the holiday seasons and shopping frenzy. But for Amazon, this is even more pronounced and the relative drop into Q1 is more pronounced as well, as Amazon Ads closely traces the ecommerce activity as shown below:

What this tells us is probably that a large majority of Amazon’s ad revenue is in Amazon Sponsored Ads, the advertising which is displayed inside the marketplace (as opposed to Amazon DSP which is mainly outside).

What does this tell us about the future?

The growth of Amazon Ads is strongly correlated with Amazon ecommerce. If Amazon ecommerce continues to grow by 26%, we can expect Amazon Ads to grow at the same rate or higher. Advertising has grown as a part of Ecommerce for a while, and the question is whether there is an upper limit. Within Amazon Advertising, one of the reporting measures is an internal ratio called ACOS: Advertising Cost of Sale. The higher the ACOS, the less net margin a merchant generates. This is a good illustration of existence of an upper limit to how much advertising the system can support.

With this potential ceiling for advertising on the marketplace, the huge growth opportunity for Amazon obviously resides outside of the marketplace and this is where Amazon DSP comes into play. Amazon DSP leverages user data for advertising outside of Amazon and has an almost unlimited potential for growth.

If the growth for Amazon Advertising beyond the growth of ecommerce, and solely based on the additional growth of the Amazon DSP offering, then we should probably expect to see a slowing of the growth in coming quarters with the floor being the growth rate for ecommerce itself. Currently sitting at 26%.

But with Covid19 predictions are hard to make

However, Q2 results in 2020 will reflect a completely different picture of where both Ecommerce and Ads are going due to the impact of the Corona virus disease which affects both the volume and types of ecommerce and the volume of advertising. In a crisis situation, advertising spend is often cut but in the present situation, there is also an effect of reorientation. There could be shifts from other channels to Amazon and there are definitely shifts between categories of products.

But whatever the Q2 figures will be, they are likely to show a further catch-up of Amazon Ads compared to Google and Facebook whose advertising revenues will likely be more affected in times of crisis. So, despite the crisis situation, Amazon is probably still catching triopoly share at the time of writing.