• by Ivan Ivanov , Op-Ed Contributor, June 15, 2018

Amazon looks to be the first global company to disrupt the duopoly’s digital advertising revenue. And the timing couldn’t be better, as the duopoly’s (Facebook, Google) dominance is diminishing, according to eMarketer. 

Currently, Google and Facebook control 59% of digital ad spend — a high proportion but one that has dropped almost 2% since 2017. The duopoly’s share of ad dollars will keep falling until 2020.

The principal reason for this decline is Amazon’s foray into advertising. Not only is the online giant attempting to leverage its first-party consumer data to break into the ad marketplace, but it’s establishing its DSP business and launching a header bidder solution – Unified Ad Marketplace (UAM) – to hit the duopoly where it hurts.  

Will Amazon be successful in taking competitive advantage? If so, what does that mean for the rest of the industry?

Amazon’s day might be dawning 

Amazon is fast becoming a sizable advertising force; just last year, per eMarketer, its U.S. digital ad profit more than doubled, reaching $2 billion. It is expected to reach $3.19 billion by 2019. Moreover, WPP – the world’s largest advertising company – channeled $200 million in client ad spend to Amazon in 2017. It is due to increase that share to $300 million this year.

Tellingly, Amazon has also, per Bloomberg, stopped buying ads on Google  and started enhancing its own international resources.

It's clear Amazon is upping its ad game, causing concern to the duopoly. Yet as Google and Facebook brace themselves for a battle, the wider industry may have reason to celebrate.

Good news for publishers

Amazon’s challenge opens multiple doors for smaller publishers that have previously struggled to compete. For starters, it raises awareness amongst brands of viable advertising environments beyond Facebook and Google. So far, many businesses have chosen the duopoly for advertising needs because they are known quantities with solid brand positioning, not because they provide the best solution.

Amazon’s rise disrupts such autopilot activity and encourages flow away from the duopoly.

Secondly, Amazon’s threat presents the perfect opportunity for small publishers to take advantage of interest in alternative ad space, and showcase the benefits of their own platforms. For example, niche publishers often have a devoted following of readers and cover unique topics, which can be marketed as a chance to reach highly-engaged, precise audiences with targeted offers, such as limited-edition football boots for committed sports fans 16-24.

All in all, there is an increasingly lucrative opportunity for smaller publishers to contend with the big players in the ecosystem; some may even be inclined to form consortia to increase the force with which they tackle the duopoly.

Advantages for advertisers

The advantages of Amazon’s rise to power aren’t restricted to publishers. When it comes to advertising on the site, Amazon’s halo effect of organic sales through suggested products, product combinations and add-on items offer advertisers exponential circular growth. As trust in Amazon grows, so will the ROI advertisers can expect. Equally, the larger Amazon’s portion of ad-spend, the less the duopoly can glean, leveling the playing the field for advertisers.

At a general level, advertisers can also leverage a wider world of choice. By casting their net past the duopoly to include Amazon and other publishers who don’t conform to its ad rules, they can enhance campaign scale and diversity.

Barriers to growth

It must be acknowledged, however, that these possibilities depend on Amazon navigating potential obstacles. Many advertisers aren’t bidding for Amazon inventory yet, as they are unaware of its efficacy, which could result in the digital giant missing the mark for projected growth. Additionally, programmatic ad spend has slowed, following the implementation of the GDPR and U.S. publishers have ceased programmatic advertising in the EU to avoid a potential breach of the regulation.

Further market education and confidence are needed for Amazon to succeed in its takeover, but the signs are promising. The more spent on Amazon’s inventory, the stronger its market position and the weaker the duopoly. And more importantly, the greater the opportunities for advertisers to expand their horizons and for overshadowed publishers to step into the limelight as credible alternatives.