Amazon currently has about 4% of the advertising market, a share that will grow to 7% in two years, according to researcher eMarketer.
While Amazon will grab market share from Google and Facebook, those companies will be better positioned to withstand the threat. Digital publications will also feel squeezed, pushing them to build up revenue from subscriptions, agency services, conferences, market research and referrals to ecommerce sites like Amazon.
The ecommerce giant has a wealth of data about its customers, including a history of their product searches and purchases. Facebook and Google don’t have that level of detail about personal spending. The information can help advertisers to reach target customers, especially when they’re in the mood to shop.
Vice, Vox and BuzzFeed have scaled back their growth plans and are seeking additional sources of revenue. The three companies have had ready access to venture funding, but their investors are likely to get restless as their exit plans get delayed.
As traditional media companies like Disney and Fox merge, and telcos like AT&T and Verizon buy up content providers, the digital startups may feel compelled to sell.
BuzzFeed’s Jonah Peretti last month mused publicly about the possibility of a merger among BuzzFeed, Vice, Vox Media, Group Nine Media and Refinery29.
The outlook is especially worrisome for smaller publishers. Millennial-focused site Mic cut staff amid its sale to Bustle Digital Group for about $5 million, while Rookie also ceased publication. Women-focused Little Things shut down in February after Facebook changed its news feed algorithm to cut back on publisher content.
Small publishers “can’t compete in scale, they can’t compete in terms of quality
and breadth of content, and they can’t compete because they only have one revenue stream,” a board member of a big digital-media company told Vanity Fair columnist Joe Pompeo.
Amazon’s growing clout in digital advertising will only add to their challenges.