COVID-19 Leads to Increase in Ecommerce Ad Spending
Investors already know that the coronavirus pandemic has been accelerate the adoption of e-commerce that consumers buy online from the security of their homes. It is also causing a related increase in ad spend on e-commerce platforms, according to recent estimates from eMarketer. This is good news for the e-commerce giant Amazon.com, which has already developed its advertising activity at dizzying speed during the last years.
Here’s how much advertisers are expected to spend on ecommerce ads this year.
Amazon will recover 76% of e-commerce ad spend this year
eMarketer estimates that ad spend on e-commerce platforms will increase by 39% to $ 17.4 billion this year, which will represent about 12% of all digital ad spend in the United States. Spending growth is accelerating due to the COVID-19 pandemic.
“Ecommerce channel ads are growing in popularity as brands realize the value of targeting prospects with intent to buy within large ecommerce marketplaces,” said Andrew Lipsman, eMarketer, in a statement. “The trend only accelerated during the pandemic, as e-commerce accounts for a higher percentage of sales for most brands and retailers.”
Unsurprisingly, Amazon is expected to recoup the vast majority of all that ad spend since it is the largest ecommerce platform in the world. Here’s how other notable ecommerce sites technology companies are expected to come out this year, according to eMarketer.
Advertising has been a key driver of profitability at Amazon as these revenues have much higher margins than the core ecommerce business. Amazon’s e-commerce segment in North America has an operating margin of just 3.4%. “Advertising and [Amazon Web Services] were definitely a big part of the gross margin increases, ”CFO Brian Olsavsky said on the latest earnings conference call.
Amazon’s “Other” segment consists primarily of advertising revenue, along with other services. Other income totaled $ 16.5 billion in the past four quarters.
eMarketer expects Amazon to further expand its dominance of e-commerce ad spend, predicting that the company will capture 77% of the entire market by 2022. Walmart has invested heavily in growing its e-commerce activity, including the recent introduction of Walmart +, a membership program that is loosely modeled on Amazon Prime. Walmart’s e-commerce sales nearly doubled in the last quarter and the retail heavyweight recently ebay eclipsed in e-commerce sales for the first time.
Etsy is also benefiting from a massive influx of customers, with active buyers surging 41% in the last quarter and revenue soaring 137%.
“As advertisers look to a future where it is more difficult to identify and track users, ecommerce properties have the benefits of purchase and intent data on the targeting side, as well as marketing. ‘Closed-loop attribution for measurement and optimization, “noted Nicole Perrin, analyst at eMarketer.
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