April 15, 2020

Amazon's Ad Sales & Ad Spend Are Growing. Why it Matters

When it comes to online retail, all eyes are on Amazon. The company dominates the one-day shipping space and it’s taking in about 60% of general product searches made online. There’s another sphere where Amazon’s growth has been accelerating over the past few years: advertising spend. And it doesn’t seem to be slowing down.

Amazon ad spend growth by the numbers

If you count the numbers, Amazon is completely dominating in the world of general advertising spend. But what does that look like exactly? Here’s a quick breakdown.

Amazon’s annual advertising expense reports hit $11 billion last year—that’s an increase of 34% and $2.8 billion year to year since 2009. The company’s advertising spending last year outpaced even its net sales—those reached $280.5 billion in 2019, an increase of just 20%. Amazon noted in its annual report that its total marketing expense was $18.9 billion in advertising and other related costs.

Put simply, nearly 2% of all global ad spend currently comes from Amazon, according to Campaign. That means the company has outspent Procter & Gamble and Unilever in advertising.

“Amazon is likely the biggest advertiser on Earth,” said Brian Wieser, president of global intelligence at WPP’s Group M, in Campaign.

Why is Amazon spending so much?

Amazon’s ad spend has steadily increased because the company has boosted its spending on promotional costs to market Amazon products and services around the world. It’s four largest markets are the U.S., Germany, the UK, and Japan. Amazon also has many brands under its umbrella to market: Fire, Alexa, Kindle, Prime, and Twitch are just a few.

Amazon uses a number of marketing channels to reach their customers, including sponsored search, third-party customer referrals, social media and online advertising, television advertising—Amazon’s become a regular advertiser during the Super Bowl each year—and other initiatives the company is making to attract buyers. Amazon’s marketing costs also include payroll for personnel engaged in marketing and sales.

Where Amazon stands in digital ad sales

While it may be first in the world in general ad spend, Amazon is currently fourth in the world in digital ad sales, behind Google, Facebook, and Alibaba, according to Campaign, but that number may soon change.

Amazon is growing faster than any major ad publisher in the world. Marketplace Pulse predicts that trend will continue as the company introduces more advertising tools and products. It’s estimated that Amazon will spend over $13 billion for advertising in 2020 and nearly $17 billion in 2021. By 2021, eMarketer predicts, nearly one in 10 US digital ad dollars will be going to Amazon, giving the company near dominance in the digital ad space, too.

Is there any hint that Amazon’s ad spending might be slowing down?

According to Business Insider, there are some short term indicators that it already has. While the company’s ad revenue growth has been increasing year over year, it decelerated in recent quarters, “likely as its core display ad products reach maturity,” Business Insider reports.

As Amazon diversifies its ad offerings across multiple channels, its ad business will continue to grow overall. It may not overtake Google, Facebook, or Alibaba over the next year or two, but Amazon will certainly come close if its current trajectory continues.

To learn more about Amazon’s advertising growth and how you can sell or increase sales on Amazon.com, call one of our Pattern experts at (888) 881-7576 or reach out through the form below.

More Resources
The Experts' Guide to Amazon Advertising Strategy
A Deeper Dive Into Amazon Vendor & Seller Central
The Great Debate: Is Revenue More Important Than Profit?