Amazon’s advertising push will not threaten Google’s search business, analyst says

Analysts at Mizuho say search appears to be the ‘biggest opportunity’ in advertising for Amazon

PUBLISHED : Wednesday, 03 January, 2018, 4:22pm
UPDATED : Wednesday, 03 January, 2018, 4:22pm

By Arjun Kharpal

Amazon’s push into new advertising products will not threaten Google’s search business, analysts at Mizuho said in a note on Tuesday.

CNBC reported in December that the U.S. e-commerce giant is experimenting with various advertising products across its portfolio and off of its website. This includes e-commerce search and video products too .

Sources also told CNBC this week that Amazon is in talks with large companies about letting them promote products on the Echo smart speaker devices via the voice assistant Alexa.

The news shows how Amazon is gearing up for a big year of advertising.

Amazon currently has three main types of ad products. The first is sponsored product ads which appear when you search for an item on Amazon. The second is headline search ads which also display in search results at the top of the page. And the final one is a standard product display ad paid for by a company.

Mizuho said it hosted an investor call with Merkle RKG, a marketing and data platform. Based on Merkle’s studies, Mizuho said search appears to be the “biggest opportunity” in advertising for Amazon “given its scale and the potential to increase pricing.”

But the investment bank said that Amazon’s advertising technology is still in its “early development stage so it is well behind that of Google.” For example, Mizuho said Amazon’s customer targeting products are not up to scratch yet and therefore monetization is harder.

“That said, we believe that Amazon has plenty of headroom to improve its performance and monetization,” Mizuho analyst James Lee wrote in the note.

Amazon’s advertising push puts it in competition with the likes of Google and Facebook , both of which currently dominate the digital ad space. In the U.S., Google and Facebook are expected to rake in 63.1 per cent of digital ad investment in 2017, according to eMarketer. In a report from March, eMarketer also forecast that Google’s share of the search ad market could grow to more than 80 per cent by 2019 .

And Mizuho said that Amazon is unlikely to threaten the search business for Google.

“We do not expect the emergence of Amazon’s ad business to threaten Google’s search business. Merkle is seeing very little overlap between Amazon’s ad customers and Google’s. In addition, the use case for Amazon and Google’s search is very different,” Lee wrote in the note.

The investment bank said it maintains its “buy” rating on Amazon’s stock with a price target of US$1,300, which if realised, would represent a 9.3 per cent rise from Tuesday’s close.

Read the original article at CNBC