Tag Archive: Amazon

1. Are Big Tech’s Q2 results too good?

   August 7, 2020 12:06 Comments Off on Are Big Tech’s Q2 results too good?

   Across the world, national economies are in deep recession, businesses are folding and unemployment has soared. The coronavirus pandemic has wreaked havoc for so many, yet there is a subset of the global economy which demonstrates extraordinary resilience.  

   The tech giants release their Q2 2020 results

   On Thursday last week, amid much anticipation, the Big Tech big four released their second-quarter results. They would have been impressive in the pre-Covid world, but in the current context they were nothing short of astonishing. Facebook reported an 11% growth in revenue year on year, to $18.7 billion, and its profit doubled to $5.18 billion; its number of monthly active users (MAU) rose 12% to 2.7 billion. Amazon posted a record profit of $5.2billion, with sales rising 40% to $88.9 billion, while Apple’s profit rose 12% to $11.25 billion, and its revenue by 10% to $59.69 billion, thanks partly to a 1% increase in iPhone sales. Alphabet, Google’s parent company, reported a profit of $7 billion, which was down on the year, but still above the share price expected by Wall Street ($10.13 a share vs $8.21).  

   A great quarter for Facebook

   Despite the negative publicity that Facebook suffered following the #StopHateForProfit campaign and subsequent boycott of the platform by some of the world’s largest advertisers, the second quarter of 2020 was a great one for the social media giant, from a financial perspective. Revenue growth slowed, but it was still far greater than what analysts on Wall Street predicted. The financial success and growth in both monthly and daily active users signal that people and businesses used Facebook to stay in touch with loved ones and customers in the spring, when much of the world was in lockdown because of the pandemic. Facebook states that 180 million businesses use their tools, and it has 9 million active advertisers; this well-established longtail of smaller advertisers goes a long way to explaining why the July boycott wasn’t financially damaging to the platform, although it was very challenging from a PR perspective. Facebook is strengthening its relationship with its small business advertisers with the launch of two new initiatives, Facebook Shops and in-messenger commerce. 

   Strong performances from Apple, Amazon and Alphabet

   The other three components of the Big Four also enjoyed remarkable success in Q2. While Alphabet’s ad revenue was down, many analysts believe that this was largely because it came from a much larger base than Facebook’s, for example. YouTube’s ad revenue increased by 5.8% to $3.8 billion, which was much slower than its Q1 performance but still impressive given the context, namely many advertisers halting their ad spend. 

   Amazon, possibly unsurprisingly with so many people stuck at home, had a strong second quarter, with a record profit of $5.2 billion and growth of more than 40% in its division that is largely comprised of its ad sales business. The retail giant brought in revenue of more than $7 billion more than expected, despite initially being caught off guard by a sudden spike in demand during the pandemic, as more people chose to shop from the safety of their homes. It says it is currently expanding its fulfilment centres as it prepares for the peak holiday shopping season at the end of the year. 

   Despite store closures and operations disrupted by the pandemic, Apple’s revenue was the highest the company has ever reported in its second quarter, up 11% year on year. This rise is due largely to a 1% increase in iPhone sales, helped by the launch of the lower-cost iPhone SE. 

   Results that good don’t look good

   The tech giants and investors will undoubtedly be pleased with their performance in the second quarter, particularly given the economic context, but there is a fly in the ointment. Results this great, when so much of the world is in a downward spiral, are difficult to justify, and do nothing to quell suspicions that the Big Four are far too powerful, with too large a monopoly on the marketplace. Just the day before the Q2 results were released, the CEOs of Apple, Facebook, Alphabet and Amazon appeared before the US Congress’ antitrust hearing, as a culmination of 13 months of investigation by lawmakers into the market power of Big Tech. The key criticism against the four companies is that they have engaged in anti-competitive behaviour, using their power to choke the ability of their smaller rivals to compete with them. The investigation will produce a report after the hearing, which will be released towards the end of the year and will form the basis of new laws to regulate Silicon Valley.  

   Each of the CEOs – Tim Cook, Mark Zuckerberg, Sundar Pichai and Jeff Bezos – tried to downplay the scale of their market leadership to Congress on July 29th. But their efforts were undermined by their huge earnings released just the next day, which not only underscore how reliant people became on Big Tech during the pandemic, but also symbolise how powerful these companies are and their ability to see off smaller competitors.  

   An awareness of perception issues

   Each company was acutely aware of the optics of their Q2 results. Amazon’s press release went out of its way to detail the ways in which it contributes to communities and its employees. Tim Cook said that Apple was conscious that its results contrasted sharply with the fortunes of so many others over the last few months, and that the company doesn’t have a zero-sum approach to prosperity, while Mark Zuckerberg highlighted his belief that Facebook’s products have changed the world for the better and improved people’s lives. Whether these statements will have any bearing on Congress’ conclusions remains to be seen. 

   Is Big Tech on notice?

   It’s very likely that the Big Four’s remarkable Q2 results will feed into Congress’ belief that they are too powerful; indeed, they – along with Microsoft – currently represent more than a fifth of the S&P 500, the first time since the 1980s that the five largest companies have had such a large share of the index. Congress lawmakers will inevitably seek to curtail that power to an extent, as it is in direct contrast with American antitrust laws. It will be fascinating to see what the implications for the Big Four, the tech sector and advertisers will be. 

   Image: Hand Robot / Shutterstock

2. Should Google be worried about Amazon?

   October 23, 2019 11:14 Comments Off on Should Google be worried about Amazon?

   It’s no secret that Amazon is no longer ‘just’ the world’s biggest retailer. Its ‘other’ business – digital advertising – is having a seismic impact on the advertising industry, so much so that is now a threat to the traditional digital advertising duopoly, Facebook and Google. This week, eMarketer released a report claiming that Amazon is ‘chipping away’ at the very core of Google’s business – search.

   Amazon is increasing its share of US digital ad spend

   Amazon’s star has been on the ascendant for a significant period of time, but 2019 has truly been a stellar year. Revenue for its ad business climbed by 37% to $3 billion in the second quarter of 2019, while back in February eMarketer predicted that Amazon would claim 8.8% of US digital adspend this year, up from 6.8% in 2018. This is impressive in itself, but even more so when you consider that Google’s share was predicted to drop to 37.2%, down from 38.2% in 2018, while Facebook would only increase theirs by 0.3%.

   Google’s near-monopoly of search is set to decrease

   This was the backdrop for the latest eMarketer report about Amazon’s search share. The US search market is set to grow by 17% this year, to a huge $55.17 billion. While Google still of course owns the lion’s share of the market, with 73.1% ($40.3bn), eMarketer anticipates that that will fall to 70.5% by 2021. Amazon, on the other hand, is expected to have grown its share of the market to 12.9% by the end of 2019, and to 15.9% in 2021. Microsoft has now been relegated to third place in the search market, with a 6.5% share.

   What’s behind Amazon’s success in the space?

   So what is behind Amazon’s increasing prominence in digital advertising? The key reason is its understanding of consumers’ purchasing behaviours. It has a treasure trove of data about buying habits which is of course very valuable for advertisers, as they can reach customers right at the time that they intend to make a purchase. Amazon’s data even allows advertisers to understand when a buyer might want to repurchase a product, so that they can be targeted at the right time, with less wastage.

   Consumers’ research behaviour is changing as well: they now increasingly use Amazon as a research resource rather than just a purchasing platform, and use broader search terms such as ‘gift’ or ‘makeup’, offering ample opportunities for brands to reach them. And it’s not just brands that sell directly on Amazon that can benefit; advertisers that sell products and services that can’t be bought on Amazon, such as cars or insurance, can use the retailer’s extensive customer data to understand who might be interested in buying their products. Finally, Amazon has very high conversion rates, particularly for products sold on their platform: 20-30%, versus 1-10% on Facebook, for example, where ads are seen as more intrusive and trust is an issue.

   Harnessing its advantages

   Amazon has wasted no time in harnessing these advantages over its competitors. Last year, it simplified the branding for its advertising products, creating Amazon Advertising. This includes sponsored ads which work in a similar way to Google search, allowing advertisers to bid for search terms, with the highest bidders more likely to appear in ad listings. Display ads are available programmatically for both Amazon and third-party sites using the Amazon DSP, which allows advertisers to see easily how well their media spend translates into sales.

   In 2018, Amazon acquired Sizmek’s adserving and dynamic creative units; the dynamic creative allows for more tailored ads which incorporate data such as location or shopper behaviour, while the ad server side helps advertisers to place ads and measure effectiveness, helping Amazon to better compete with Google. Overall, these acquisitions have helped Amazon improve the functionality that had been lacking in comparison to its two major competitors in the digital advertising space.

   An unexpected benefit for both Google and Amazon

   While Google will no doubt be alarmed that Amazon is encroaching on its search dominance, there is something of a silver lining. Both organisations are being examined by regulators at the Department of Justice and the Federal Trade Commission – Google because of its search stranglehold and Amazon for using its e-commerce marketplace to promote its own brands over those of rivals. While these investigations continue, it won’t hurt either of them to have increased perception of competition.

   An increasingly important player

   As Amazon increases its functionality and collects and organises evermore customer data, it will become an increasingly important player in the digital advertising sector and undoubtedly an ever more worthy recipient of valuable ad dollars. Advertisers – even those that don’t sell via the platform itself – should seriously consider Amazon’s advertising solutions for three reasons: lower pricing thanks to increased competition in the search space; remarkable conversion rates; and Amazon’s wealth of rich data from its sales funnel.

   Image: Shutterstock

3. How smart speakers are changing the way we search and shop

   November 22, 2018 11:58 Comments Off on How smart speakers are changing the way we search and shop

   Its Black Friday at the end of this week and bargain hunters across the US and Europe are readying themselves and their wallets to snap up bargains both online and in store. One thing that we can comfortably predict is that many will have their eye on a new smart speaker. The rise of the smart speaker over the last few years has been remarkable: in the US, an estimated 43.9m Americans used a smart speaker at least once a month in 2017, rising to 61.1m in 2018 and expected to increase to 76.5m by 2020 (source: eMarketer, 2018). This proliferation of smart speakers has inevitably fuelled a spike in voice search and voice commerce – and those, of course, have implications for marketers.

   Who’s using them?

   In May this year, eMarketer released its report,‘Hey Alexa, who’s using smart speakers?’. In it, the research firm points out that ‘not since the smartphone has any tech device been adopted as quickly as the smart speaker’. In fact, growth has been so strong that they predicted that the number of smart speaker users would surpass that of wearable users this year. The typical user is still the classic early tech-adopter – affluent, older millennial male – but the device is gaining traction in other demographics, particularly younger generation X women with children. What’s driving this surge? As eMarketer’s co-founder and Chief Content Officer Geoff Ramsey pointed out in his ‘Emerging Trends’ session at the ANA Masters of Marketing last month, it’s easier to talk to a device than to type into one and – crucially – smart speakers adapt to our voices and behaviour, not the other way around.

   The new battleground for the tech giants

   As is to be expected with any major technological development, the smart speaker has become the latest battleground for the tech giants, Google, Amazon, Facebook, Apple and Microsoft. Facebook and Microsoft are still to make waves in the field: the former delayed the release of its smart speaker due to user privacy concerns (understandable, given the year it has had), while Microsoft has partnered with another hardware maker instead of creating an own-brand speaker. Apple released its HomePod speaker, but the high price point and less-than-glowing reviews means it is yet to be a major player, in this space at least. That leaves Google and Amazon as the undisputed kings of the smart speaker arena. Google’s Google Home has a 29.5% share of the market, but eMarketer projected that Amazon Echo – of Alexa fame – would claim 66.6% of the smart speaker market in 2018.

   Transforming how we shop…

   As we discussed in an earlier post, Amazon is well on its way to adding a third leg to the Facebook-Google digital duopoly by increasing its advertising revenue – and its Echo smart speaker is a key way in which it will achieve this. eMarketer points out that voice is the next frontier for online commerce, and while the number of people who shop using their purchases is small (28.2% of US smart speaker owners), they predict that the number of US smart speaker buyers will double to 17.2 million between 2017 and 2018. And it is of course Amazon that benefits from this, thanks to their success in the smart speaker space and their dominance of the general ecommerce space. Echo owners can and do shop using Amazon Prime: indeed, they spend an average of $1700 a year, according to a CIRP report. That’s $400 higher than what ‘regular’ Prime customers spend annually on Amazon and 66% higher than non-Prime Amazon shoppers. CIRP’s co-founder Josh Lowitz said “We’ve long thought that Amazon is keenly focused on building increasingly loyal and frequent shopping customers, and Echo seems to promote that goal.” Brands can also create third-party apps; however, many are choosing to do this with Google Home rather than Alexa so they don’t have to compete with Amazon’s inventory.

   …and how we search

   That’s not the only way that Google may have an edge over the thus-far dominant Echo. The second most popular way that consumers use their smart speakers, after music, is search. Ramsey noted that 72% of US smart speaker users who have a smart device use them to search – it’s the second most popular activity after listening to music, and that doesn’t even include the news, weather or traffic. One third of users use them every day to search for something that they would previously have typed into a device. The implications of this for brands are particularly important. Why’s that? Because voice search usually only yields one result: consumers don’t want to listen to reams of results, and that actually could be a reason that they are choosing to use their smart speaker rather than traditional methods, so that they don’t have to sift through results. Furthermore, they don’t have to stop what they are doing.

   A voice search optimisation strategy

   The fact that there is only one search result on smart speakers means that brands either get first position or no position: it’s critically important that they start developing a solid voice search optimisation strategy to take them to the top of the search results. Econsultancy suggests that an effective way to do this is to help people when they need support with a specific task, such as cooking or trying to remove a stain – what Google has termed a ‘micro-moment’. That fits in with Ramsey’s view that voice is not just another ad vehicle – it’s a utility, and advertisers need to see it as a personalised experience that will bring consumers closer to their brand. Voice can be used to literally start a conversation with a consumer and ultimately set them along the path to purchase. As far as paid search is concerned, sponsored ad words aren’t yet available but that can surely only be a matter of time.

   Will mobile ads be impacted?

   Something else that brands need to bear in mind is that, as consumers are increasingly drawn consumers away from their mobile devices by smart speakers, they will be exposed to fewer mobile ads. We believe that it is unlikely that Amazon and Google will allow brands to ‘broadcast’ ads via their smart speakers; could this mean that digital advertising will start to see a decline?

   Agility and readiness are critical

   As the tech giants look to implement their voice assistants into other gadgets, household appliances, furniture and even cars, the opportunities for brands to become intrinsically valuable and useful to the consumer grows. With that opportunity comes complexity that will need to be navigated. As Ramsey pointed out, even the pneumonics of brand and product names will need to be considered! There is much to be gained by those who are most agile and can stay ahead.

   Thumbnail image: Shutterstock

4. Amazon is coming for your ad dollars

   October 11, 2018 14:50 Comments Off on Amazon is coming for your ad dollars

   The online shopping platform has streamlined its advertising offering, making it a real threat for Google and Facebook.

   Turning the duopoly into a triopoly

   When we think of major digital ad platforms, our thoughts naturally turn to the giants, Google and Facebook. There is no doubting that for many years the ‘big two’ have had a duopoly of advertisers’ digital budgets across much of the world. Google’s ad revenue in quarter two of this year was a huge $28 billion, while Facebook’s was a smaller but still very sizeable $13 billion, of which 15% was generated by Instagram. We’ve discussed in our blog before how Facebook seems to be struggling to grow in the face of privacy scandals and user stagnation and, conversely, how Google appears to go from strength to strength.

   However, there is a third player that’s turning the duopoly into a triopoly. A report published by eMarketer in September revealed that Amazon will more than double its US digital ad revenues this year, meaning it will overtake Oath and Microsoft to become the third largest digital advertising platform. This news came as Amazon revealed that it had streamlined its somewhat messy advertising offering into a single brand, Amazon Advertising.

   Amazon’s key advantage is its deep understanding of consumer purchasing habits

   Amazon Advertising’s model is based on the fact that around 49% of product searches in the US start on Amazon – and that offers invaluable insights into the minds of purchasers. While Google can store your implicit shopping intention, Amazon knows your actual purchasing behaviour – what you bought, when you bought it, how many clicks it took you and what other product categories you bought or considered at the same time. These insights can be used to create intelligent retargeting campaigns that showcases products that the consumer is more likely to buy at a specific time. With the drive towards Amazon Prime and the purchase of Whole Foods, those insights can become even more pertinent. Furthermore, ads on Amazon can be optimised within a matter of hours, allowing advertisers to drive a much higher return on their investment.

   Advertisers are moving budgets from Google search into Amazon ads

   It is these razor-sharp insights and real-time optimisation that are the headache for Google and Facebook, particularly the latter. Media agency executives have revealed that some

   advertisers are moving more than half the budget that they would normally invest with Google Search (an estimated 83% of Google’s ad revenues) into Amazon ads, amounting to hundreds of millions of dollars. The brands in question are almost all from the consumer product goods category, whose products are sold on the Amazon platform, and are attracted by the offering discussed above as well as the seamless shopping experience: there’s no need to set up an account or input card details, as there might be with a Google search ad. Amazon is also unburdened by the fake news problems that have dogged Facebook and, as an apolitical space, it is unlikely to be leveraged as a political tool.

   Will the lure of profit be at the expense of user experience?

   It’s possible, even likely that Amazon will be bewitched by the huge profits that can be won from advertising, at the expense of the user experience. The purchasing behaviour data that Amazon has at its fingertips means that they can develop much better targeting tools than Facebook – and just as good as Google’s. Highly effective branding campaigns therefore become a reality, and while the consumer could find these at best a distraction and at worst disturbing, it will be difficult for Amazon to resist short-term profit for something in which it is unbeatable.

   Google and Facebook are safe for now – but challenging times are ahead

   Google and Facebook aren’t in any immediate danger. Amazon is a distant third in the triopoly: it commands 4.1% of digital ad spend in the US, compared to Facebook’s 20.6% and Google’s 37.1%. And while Google’s Search revenues may be flattening somewhat, some of the drift is going into other Google properties such as YouTube, and not just Amazon’s coffers. Furthermore, brands from very lucrative advertising categories such as automotive and travel don’t currently have much incentive to move any investment to Amazon as their products are not easily sellable on the platform.

   Challenging times are ahead for Google and Facebook, in this and many respects. Amazon is certainly one to watch in this space.

   Thumbnail image: Shutterstock

5. The march of the tech titans on live sport

   August 21, 2018 14:14 Comments Off on The march of the tech titans on live sport

   Facebook, Amazon, Google, Twitter and others are leveraging the power of live sports to help them grow.

   People are watching sport online

   The FIFA World Cup earlier this summer and other major sporting events have confirmed what everyone has long suspected: that an increasing number of fans are streaming matches online instead of watching them the more traditional way, on television. This is very good news for tech companies such as Amazon, Twitter, Google and Facebook who are looking to leverage the passion of live sport viewers and its appointment-to-view nature as a way of reaching new users and increasing ROI on existing ones.

   Facebook has been looking for ways to super charge its growth

   Facebook in particular has upped its live sports game, aggressively pursuing the rights to air football and other sports across the world. At the end of June, the social network announced disappointing results for the second quarter: this was in part down to issues surrounding GDPR in Europe and the Cambridge Analytica scandal, but also, ironically, due to Facebook’s huge success – it has reached near-saturation point in mature markets in North America and Europe. Its future growth strategy therefore relies on two things: increasing revenue on each existing user in these mature markets, and attracting more users in countries where Facebook is less ubiquitous, particularly Asia and Latin America.

   The answer: live football

   The latter part of the strategy is already well underway, with live sports playing a key role – this was evident when they hired Eurosports CEO Peter Hutton to lead the push. Last week, it was announced that La Liga had signed an exclusive three-year deal with Facebook to live stream all its 380 matches for free to Facebook users in India, Pakistan, Bangladesh, Sri Lanka, Afghanistan, Bhutan, Nepal and the Maldives. The platform has 348 million users across these markets, with 270 million of those in India. India is a key growth market for Facebook: it already has the largest Facebook user base in the world (270 million versus the US’s 210 million) but, with a population of around 1.3 billion and a projected 500 million internet users by the end of this year, there is huge room for growth for Facebook. Increasing smartphone penetration, relatively affordable mobile data and a passionate football fanbase means that the La Liga deal is a smart move from the platform. This move is in addition to Facebook’s plans to roll out its video platform, Watch, into India – it’s currently only available in the US.

   La Liga isn’t Facebook’s only move into live football streaming: just a few days after the La Liga announcement, UEFA confirmed that Facebook had bought the media rights for certain Champions League live matches in Spanish-speaking Latin America for the

   2018-2021 cycle. The matches they have the rights to include the final and Super Cup games, and the number of top international players involved in the tournament means that it is a huge deal across the continent.

   Other tech companies are also snapping up live sports rights

   Facebook’s activities in the live sports space are matched by its competitors’: Amazon in particular has been signing deals to attract more customers to its Prime platform, including a five-year deal for the exclusive broadcast rights of the US Open tennis tournament in the UK, the rights to screen 20 Premier League football games each season, also in the UK, from 2019 to 2022 and streaming rights for Thursday night NFL games in the US. Meanwhile, Twitter works closely with the NBA, partnering with them to help people keep up with the latest news and developments and watch the games, no matter where they are. YouTube has the rights to Major League Soccer games, including the Seattle Sounders and Los Angeles FC, for which it has both streaming and broadcast rights.

   The future of live sport and entertainment looks dramatically different

   There are concerns amongst consumers, particularly in India, that slow broadband speeds will affect their enjoyment of games, and that it will take something away from the camaraderie of watching games as a group on television. This is perhaps mitigated somewhat by the fact that the games will be free to view. From an industry perspective the arrival of tech platforms on the live sports scene is a seismic shift. For advertisers, concern about TV live sports strategies being adversely affected will surely be offset by the huge opportunities presented by delivering targeted ads to passionate sports fans in real-time. For the major players in broadcasting space, it is the fear of the existential threat that this precise situation causes that has led them to rethink and overhaul how they operate; this has led to some of the huge mergers we have seen recently, including the AT&T takeover of Time Warner and Disney’s deal to purchase 21st century Fox’s film and television assets, which was recently approved by shareholders.

   There can be no denying that the media and technology industries are converging at breath-taking speed, and that the landscape will look very different, very soon. Agility and a willingness to innovate and take calculated risks will be the ways to succeed as this transformation takes place.

   Thumbnail image: Shutterstock.com