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It’s hard to ignore the fact that 2018 was a rough year for Facebook. Starting in March, when the high-profile Cambridge Analytica data privacy scandal began to break, Facebook seemed to be mired in a constant series of mini-scandals involving the misuse of the personal data of its users. So perhaps not surprisingly, digital advertisers appear to be looking for new platforms for their clients other than Facebook, and one of the platforms that could benefit the most is Amazon.
Recent facts and figures from the digital advertising world suggest that ad spending on Amazon is increasing, while ad spending on Facebook is declining. For example, in 2018, total advertising on Facebook fell by 3 percent, while total advertising on Instagram (another Facebook property) increased by only 2 percent. At the same time, Amazon nearly doubled its ad revenue among top U.S. ad buyers. By 2020, the thinking goes, Amazon might control as much as 12 percent of total digital ad spending. That’s still a long way from Facebook’s nearly 20 percent market share, but it’s certainly a trend to watch.
Data privacy concerns and digital advertising
According to a December 2018 Cowen survey of 50 senior U.S. ad buyers, nearly one in five said that data privacy concerns would have an impact on their digital advertising spend. Together, these 50 senior U.S. ad buyers control $14 billion in digital ad budgets (slightly more than half of Facebook’s total annual ad revenues), so any continuing data privacy issues could start to weigh heavily on Facebook’s ability to attract ad dollars. In short, if legal and regulatory issues at Facebook spook advertisers, they might start to turn their attention to Amazon.
Of course, that’s not to say that Amazon is immune from these data privacy issues, either. The past 12 months have been filled with stories about Amazon’s personal digital assistant, Alexa, and some of the strange things it appears to be doing and saying. AI, of course, powers Alexa, so it’s easy to see why tech conspiracy theorists have filled YouTube with videos documenting strange things that Alexa purportedly has said in response to questions. (Just search “Alexa laughing randomly” on YouTube.)
The big picture to keep in mind is that Facebook is facing stagnating daily active user growth, so advertisers might just be looking for an excuse to leave. Moreover, Facebook has said repeatedly that it has maxed out advertising inventory for its mobile app, so even before the new data privacy concerns came along, advertisers already knew that they needed to be looking elsewhere. Being able to mention “Cambridge Analytica” in client meetings now gives them the needed cover to abandon Facebook.
Amazon, the new digital advertising giant?
So how could Amazon benefit from an influx of new advertisers? Well, get prepared for your Amazon search results to start including more and more ads. Type in just about any generic product name, and you’ll likely get sponsored search results thrown in with the official search results. For example, if you type in “coffee mug” into Amazon, you’ll get sponsored ads from Starbucks at the top of the page, followed by a listing of products like travel mugs, ceramic mugs and stainless steel mugs.
Ultimately, what matters for advertisers is Return on Investment (ROI). As long as Amazon is able to showcase a high ROI for search advertising, then advertisers will be more than willing to move their dollars from Google and Facebook to Amazon. As a result, by 2020, becoming the #1 search result on Amazon might become even more important for some products than being the #1 search result on Google.