Can Amazon’s Advertising Revenues Reach $60 Billion in 5 years?

by Trefis Team
+25.66%
Upside
1752
Market
2201
Trefis
AMZN
Amazon
Rate   |   votes   |   Share

Amazon’s (NASDAQ:AMZN) advertising revenue growth over recent years, while logical, has come as a surprise to most. After all,  Amazon is one of the world’s largest retailers, and its retail business has been dominated by its e-commerce site, where GMVs have consistently risen. While Google and Facebook usually helped customers discover products they might be interested in, Amazon focused almost completely on fulfilling the demand for those products till a couple of years ago.

But Amazon has capitalized on the need to help discovery of products on its e-platforms over recent years – allowing it to nearly double its advertising income in each quarter of 2018. Amazon’s access to an enviable trove of customer transaction data, one of the world’s largest spread of SKUs and a large customer base is likely to help the company’s advertising business grow rapidly over coming years. Considering the levers that Amazon has, Trefis estimates that Amazon’s U.S. advertising business could potentially reach $60 billion by 2024.

Amazon’s revenue from the U.S. have been increasing steadily. We expect this contribution to continue growing over the next few years, leading to advertising revenues from the U.S. potentially reaching $60 billion by 2024. As we highlight in the chart below, Amazon’s U.S. online advertising revenues could grow at a CAGR of 43% over the next five years.

 

We recently published an interactive dashboard on the size and growth expectations of the U.S. online advertising market. As a part of that article, we highlighted that the U.S. online advertising market could reach $259 billion by 2024 from 108 billion in 2018, at a CAGR of 16%. This implies that Amazon can potentially grab a 23% share of the U.S. online advertising market – up from just 6.5% now.

Also, based on our fundamental analysis of Amazon’s business, we expect the company’s total revenue growth rates to begin declining due to the base effect. Despite slower year-on-year growth, Amazon’s revenues could swell to over $660 billion by 2024 from $233 billion in 2018 at a CAGR of 19%.

We note that Amazon does not break out its advertising revenue as a part of its reported numbers. However, the company’s ‘Others’ segment has been disclosed to contain mostly advertising revenues. We thus project the ‘Others’ revenue for Amazon to capture our expectations of growth based on the growth of the company’s consumer businesses. We expect Amazon’s Others revenues to reach $79 billion by 2024 from $10 billion in 2018, at a CAGR of just over 40%. With $60 billion of this number attributable to U.S. advertising as highlighted above, the remaining figure of $19 billion includes international advertising revenues along with all other non-advertising revenues for the company.

Do not agree with our forecast? Create your own forecast for Amazon’s U.S. Online Advertising Business by changing the base inputs (blue dots) on our interactive dashboard.

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs
More Trefis Data
Like our charts? Explore example interactive dashboards and create your own.
Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!