Advertising dollars have chased online shoppers during the pandemic at a rapid pace.
Spending on digital ads jumped 35% to $189 billion in 2021, an increase of $50 billion in a single year and the highest increase since 2006.
Tech giant Amazon's (AMZN) advertising revenue jumped 25% to $7.8 billion at the end of the first quarter of 2022. Google's (GOOGL) ad revenue rose 22.5% to $54.6 billion at the end of March 2022. Meanwhile Meta Platforms (FB) clocked $26.9 billion in ad revenue for the same period, an increase of 5% over first quarter 2021.
These companies make money by selling their advertising services to sellers, vendors, publishers, authors, and others through programs such as sponsored ads, display, and video advertising.
Amazon Chief Financial Officer Brian Olsavsky said the numbers were strong on the earnings call.
"We're still very happy and pleased with the way the advertising team is performing and how advertising has been valued by both sellers and vendors and others who use it to reach our customer base at the point where they're considering purchases," said Olsavsky.
Olsavsky added that Amazon will continue to roll out new products for sellers to manage their advertising and increase their ability to analyze and calculate a return on their investment.
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How Online Advertising Works
Tech giants Google, Facebook, and Amazon are considered the holy trinity of the online advertising pie commanding the lion's share of ad budgets.
But the pecking order among the three is based on the costs they charge advertisers and the revenue that generates.
Amazon's advertising rates for merchants and sellers are still cheaper than those of rivals Facebook and Google, a new study by e-commerce analytics firm Sellics has found.
Globally, Amazon charges sellers 75 cents for every time a user clicks on a particular ad attached to their site, also known as cost-per-click. These numbers have been calculated by Sellics.
The e-commerce giant charges 87 cents a click for advertisers in the U.S. The cost-per-click metric is a cost efficiency measure widely used in the ad industry.
These numbers cited in the study are competitive by industry standards.
Amazon charges advertisers 68% less money compared to Google, is 44% cheaper compared to Facebook, has 79% lower ad rates than photo-and-video-sharing site Instagram, and 86% cheaper than professional networking site LinkedIn among digital platforms, according to the advertising study by Sellics.
The Seattle company's cost for advertising is also 25% lower than the country's largest retail platform Walmart (WMT), the Sellics ad rate study showed.
The findings are based on an analysis of anonymized data from over two million Amazon ad campaigns by sellers and suppliers across 2020 and 2021.
Walmart, Target (TGT), and other retail giants have also begun selling advertisements as part of their e-commerce operations.
“It’s not just the lower cost per click that makes Amazon stand out for advertisers. Amazon is unique as an advertising platform as it combines a high purchase intent retail platform that generates revenue cost-efficiently with an enormous reach and traffic," said Sellics Chief Marketing Officer Thomas Ropel in a statement.
"Don't forget that Amazon is the top starting point for product searches across the whole web, which makes it extremely attractive for B2C and retail advertisers," added Ropel.
On Amazon's marketplace, ads placed under categories like "Tools & Home Improvement,” “Industrial & Scientific,” and “Sports & Outdoors" are the most cost effective for advertisers, the study by Sellics showed.
