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Amazon is eating into Google's most important business: Search advertising

Key Points
  • Google by far holds the highest share of search ad revenue in the U.S.
  • But as Google and other players' shares are shrinking, Amazon's search ad revenue share is climbing, according to a new eMarketer study.
  • Amazon’s share is expected to grow to 15.9% by 2021, with Google’s expected to contract to 70.5%.
Amazon CEO Jeff Bezos
Photo: Andrew Harrer/Bloomberg via Getty Images

Google still holds the lion's share of search ad revenue in the U.S., but Amazon is expected to chip away at that dominance over the next few years, according to a new eMarketer forecast.

Amazon's advertising business has seen big growth in recent years. Revenue for the company's "other" category, which includes Amazon's increasingly important online ad business, climbed 37% to $3 billion in the second quarter. The company's digital ads unit has been increasingly considered as a contender to take on the "duopoly" of Facebook and Google; eMarketer said in February Amazon was projected to claim 8.8 percent of U.S. digital ad spending in 2019, up from 6.8 percent in 2018.

Meanwhile, advertising is critical for Google: It made up about 84% of Google parent company Alphabet's revenue last quarter, with search ads a major component.

The new study focuses on search advertising, and says the U.S. search ad market is expected to grow nearly 18% this year to reach $55.17 billion. Google holds a 73.1% share of that, equaling $40.3 billion, eMarketer said. Meanwhile, Amazon is expected to grow nearly 30% over last year to reach $7.09 billion in 2019, reaching 12.9% of market share. Amazon's share is expected to grow to 15.9% by 2021, with Google's expected to contract to 70.5% of the market.

Amazon last year passed Microsoft to become the second-largest ad platform for search in the U.S., according to eMarketer. After Google and Amazon, Microsoft, Verizon Media and Yelp hold smaller pieces of the search ad revenue in the U.S. In 2019, Microsoft has 6.5%, Verizon Media has 2% and Yelp has 1.8%.

Top 5 companies in the U.S. ranked by search ad revenue
CNBC

On Amazon, sellers can bid on particular terms so they show up higher on users' search results, which make it so that brands can reach people right as they're ready to pull the trigger on a purchase.

Last year, the company's advertising functions simplified their branding and came together as "Amazon Advertising," and has since continued to beef up the offerings. The company agreed to buy an ad server and a dynamic creative optimization unit from Sizmek in May, which will help advertisers place ads and measure effectiveness and aid in personalizing ads using data.

In early October, the company held an event called "AdCon" to showcase Amazon's growing list of ad products. The event drew about 400 people in Seattle, CNBC reported.

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