A Foolish Take: Amazon Becomes a Major Contender in Digital Advertising

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Amazon (NASDAQ: AMZN) makes most of its money from its online marketplace and its cloud services. However, the tech titan has also been quietly growing an advertising business, which sells display ads across its website and hardware devices like the Kindle and Fire TV.

A recent eMarketer study predicts that Amazon's ad business will become the third-largest online ad platform in the U.S. after Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) subsidiary Google and Facebook (NASDAQ: FB) this year. The firm estimates that Amazon will generate $4.6 billion in ad revenue in the U.S. in 2018 and claim 4.1% of the overall market.

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eMarketer expects Amazon's market share to reach 7% by 2020. Meanwhile, Google and Facebook's combined market share in the U.S. could drop from 57.7% this year to 55.9% by 2020.

Advertisers will likely consider Amazon to be an attractive alternative ad platform, since it can leverage its accumulated shopper data to craft better targeted ads. Amazon's ads should also face fewer privacy concerns than Google's and Facebook's, and advertisers wouldn't need to worry about their ads being displayed alongside controversial content.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Facebook. The Motley Fool has a disclosure policy.