Amazon only has a small slice of digital ad revenue compared with behemoths like Google and Facebook, but that imbalance might change in the coming years as the top ad holding companies rapidly boost their spending with the e-commerce giant.
Publicis, WPP and Omnicom plan to increase their ad spending with Amazon to upward of $800 million, collectively, according to multiple agency executives.
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This year, WPP will spend around $200 million with Amazon, according to Martin Sorrell, chief executive of the world's largest ad holding company. It's spending on Amazon's ad products and platforms -- including search and banner ads, for example -- may increase 40% to 50% in 2018, according to another holding company executive familiar with the matter.
"We are absolutely leaning into Amazon as an ad partner and think there are big advantages to our clients," said Kelly Clark, CEO of WPP's GroupM.
French holding company Publicis also currently spends about $200 million with Amazon, and plans on boosting that figure around 50% to $300 million in 2018, according to a person familiar with the matter.
Omnicom spends around $100 million with Amazon, according to another source. That number could double next year and continue on that trajectory in the following years, the person said.
Amazon declined to comment.
Amazon in the past has only dabbled in advertising. But in recent years, the tech and commerce behemoth has quietly been building up an ad business that includes search and banner ad inventory on its own platform, as well as ads around the streaming NFL games available to Amazon Prime members. Amazon also has a product, fueled by its data and technology, that helps advertisers get their messages in front of audiences on other websites.
Amazon's appeal is in its massive audience and data -- a combination that enables it to see that ads led to an increase in brand awareness or online store sales.
As ad holding companies look for a third large platform to compete with the so-called "duopoly" of Facebook and Google, Amazon is seen as a promising contender, though it still has a long way to go.
In the U.S., Amazon is expected to generate $1.65 billion in ad revenue in 2017, $2.35 billion in 2018 and $3.19 billion in 2019, according to eMarketer estimates from September. That's a fraction of the $40 billion that Google and $22 billion that Facebook are estimated to make in U.S. ad revenue next year.
"Amazon is on a fast-track to figure more prominently in the consolidation of digital ad investment," GroupM wrote in its latest ad forecast, in which it predicted that Google and Facebook will account for 84% of all global digital spending in 2017, excluding China.
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(END) Dow Jones Newswires
December 05, 2017 11:22 ET (16:22 GMT)