Everything you need to know in less than 50 words
The economic slowdown has caused some media investors to believe the advertising market is experiencing similar instability. While Meta and Snap are both seeing a decrease in their growth, Amazon is displaying the opposite.
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Most of Amazon’s revenues come from its e-commerce and cloud computing. However, they have a healthy online ad division because their advertisers pay to promote their goods on their websites.
Last year, Amazon held 14.6% of the U.S digital ad market. They came in third to Google and Facebook, according to Insider Intelligence. In the second quarter, Amazon surpassed its peers, and its ad revenue rose 18% from the year prior.
Facebook shrunk for the first time in history, and analysts also suggest a decline in the following revenue period. In addition, other services have reported less spending on ads overall, leading to them earning less money through advertisements.
The difference between Amazon and these other competitors is Amazon has its own collection of ad data, which is important because, in 2021, Apple’s iOS privacy change made it much more difficult for ad services to track users.
Exceptionally impacted by this were Facebook and Snap. Meanwhile, because Amazon was tracking user data on their own? The change didn’t hamper them.
With the other advertising markets more dependent on a third party for their data, Amazon is a safe place to invest money. Because in this scenario, investors know they’ll see a return.
Pinterest is also using a model that will see a return for advertisers. They’re hoping they’ll lead them directly to sales by directly leading people to e-commerce from their image search engines.
The company has had lackluster growth, but the stock did increase 12% when Elliot Management stated it was the biggest shareholder, “Pinterest occupies a unique position in the advertising and shopping ecosystems.”
The market is currently less robust for social media platforms to see significant growth. But less growth isn’t the same as no growth or falling numbers. Facebook parent Meta is still in the black, which means that there’s money to go around.
With that in mind, advertisers will continue to place ads with them. Doing this will create a sense of brand recognition even if it doesn’t lead to a direct sale. That kind of recognition will urge consumers away from generic brands.
However, if those consumers are spending less money later in the year, advertisers may choose to start leaning more heavily into Amazon and any company following a similar model. Those ad companies will have slimmer budgets then, but still enough that the e-commerce giant could pick up a share and make use of their plentiful silos of information.
In the meantime, Amazon’s increased growth has assured Wall Street investors. If the commerce business is doing well, then the ad business will continue to do well. In this way, they’ve made themselves a cornerstone of the market.
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