Despite Amazon's size and popularity, it's still surprising to learn that it also has one of the world's largest search engines as people use its website to find out what it buys. Additionally, these searchers have high buying intent which makes ad listings on these results even more effective, leading to higher prices. And given that e-commerce is only going to grow over the next decade, Amazon's "real estate" will become even more valuable.
Amazon's ad business is estimated to bring in around $8 billion a quarter and is growing at an 83% rate. The digital global advertising market is expected to reach $526 billion by 2023, so there remains considerable upside in terms of the total addressable market (TAM).
Ad revenues are paid by vendors who are on Amazon's platform. The company will also have new ways to deliver advertising with Twitch, FireTV, and NFL games. Analysts estimate Amazon's total ad revenue to reach $85 billion by 2026 and account for more than 10% of digital ad spending. It would also account for nearly 10% of Amazon's total revenues.
This means that Amazon, along with Google
Amazon's platform is bound to grow as it has the largest selection of products that attract customers which in turn, attracts vendors. As the platform grows, advertising demand and prices will go higher. The ad business is better in many ways than e-commerce because the margins are so highs. Additionally, given Amazon's history, the product will likely be innovative in offering ads for different mediums and based on a customer's search history.