If Matthew Weiner were to ever do an updated version of Mad Men, it would need to be set in the West Coast. Advertising today is the purview of tech giants, whose algorithms direct you to things you didn't even know you wanted. Online advertising dwarf other mediums with Amazon's ad revenue alone more than that of the entire global newspaper industry in 2021! (H/T Scott Galloway)
The chart below (click to enlarge) from Raconteur shows how the internet has changed the advertising game over the past two decades and also decimated the newspaper industry. Before 2004, newspapers and television were responsible for over 70% of the ad business. Today, search, social media, and online video drives ~66% of the ad business. They've particularly cut into the newspaper business, which has gone from collecting ~33% of global ad spend in 2002 to ~5% in 2020.
And if the internet will soon absorb all the world's ad spend, just three companies are likely to take most of the share: Google, Meta/Facebook, and Amazon. Already these three tech giants account for 74% of global digital ad spend and 47% of total global ad spend.
Google/Alphabet is king of digital ad spend, accounting for 44% of all online ad revenues (via search and YouTube) and 16% of all ad spend period. But there's a new kid that's got everyone's attention: Amazon. The ecommerce giant generated more ad revenue than YouTube or Facebook in 4Q21. What's more Amazon's advertising arm represents just 7% of company's $470 billion of net sales.
There are several factors that have impacted Amazon’s inevitable transformation into a colossal advertising entity. These include industry trends, consumer habits, and its continued dominance in the ecommerce industry. About 3 in 4 persons say that when they look for a product online, they search on Amazon. Most importantly for sponsors, ads on Amazon have a higher conversion rate than on Google. When you want to learn about a product you might do a Google search, but if you have made a decision to purchase that product, you go on Amazon to find the best brand/price.
Imagine what Don Draper could do with that...
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