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Amazon’s Pandemic Cloud has a Silver Lining

The Pandemic of 2020 may go down as the year when one single event changed the world’s economic landscape more than any other event in recent history. As the world begins to recover, new insights on the pandemic’s impact are surfacing that may contradict the premise that the event caused severe damage to all players across the economy. As physical commercial businesses were shuttered, consumers were driven to the internet to satisfy purchases of even the most basic of needs. Those industry players that were best positioned in the eCommerce sector had no choice but to benefit from the actions taken to curtail the spread of COVID-19.

The $253 billion industry focused on bringing consumers together with brands, is predicted to experience a near $20 billion fall in revenue due to the 2020 event. But even those numbers obscure the fact that digital advertising grew its share of the advertising market by 12% for the same period, giving credence to the proverbial insight that even the darkest of clouds hold a silver lining for someone. In the ad game, that someone appears to be Amazon. Surprised?

Amazon is the single largest spender on advertising at almost $7 billion, and it appears they may just become the largest recipient of advertising dollars. Amazon’s “Other” unit, primarily made up of advertising and included sales related to its other service offerings, had a whopping 77% year-over-year growth rate. While stay-at-home trends certainly aided the increase, eCommerce spend to gain on brick-and-mortar retailers as restrictions ease. Facebook and Alphabet are also experiencing less significant gains in its advertising businesses.

For over a year, warnings have been sounded that one of the most significant challenges for data collectors and marketers in 2021 will be complying with regulations concerning the collection and use of consumer data. After the General Data Protection Regulation (GDPR) was enacted in Europe in 2018, California legislators passed the California Privacy Rights Act (CPRA), scheduled to go into effect on January 1, 2023. The one-two combination punch to digital advertiser’s data collection practices of the past is the advertising industry’s most formidable hurdle lying ahead. Advertisers collect and use consumers’ data to target specific customers with specific messaging and advertising. The practice has revolutionized sellers’ abilities to connect with potential buyers in a personal and finely targeted manner. The new regulations promise to change digital advertising forever.

In response, Amazon has partnered with Scripps’ Octane OTT to sell Amazon OTT inventory across IMDb TV, live streaming service Twitch, top-tier network and broadcaster apps, and Amazon’s News apps to local businesses. Amazon OTT and Twitch jointly reach an unduplicated monthly audience of 120 million viewers across the U.S. “Scripps’ collaboration with Amazon Advertising underscore our commitment to help local advertisers engage hard-to-reach consumers and extend the value of their media investment,” said Missy Evenson, vice president of sales for Scripps’ Local Media. “As television advertisers look for ways to reach cord-cutter and cord-never audiences, incremental reach becomes key to any campaign’s success. This initiative is consistent with our commitment to deliver the highest quality brand-safe inventory to our customers while helping them engage these essential audiences.” The move comes as advertisers seek environments to advertise that give them reliable data on the effectiveness of campaigns. Without third-party data, Amazon is in the position to dominate the digital ad game.

Amazon’s dominance in the marketplace will be less affected by the new regulations because of in-house data inventory value. EMarketer estimates 89% of Amazon’s net digital ad revenues in the U.S. are from e-commerce channel ads. Still, they are increasingly making a move toward more brand-driven advertising to accelerate growth. “I think this is a massive opportunity,” said Mindshare’s McAndrew. “You’re going to see them move purposefully into the brand advertising area in ways they haven’t before. They’ve got all the ingredients to win in this realm.”

But Amazon, Facebook, and Google may have more substantial hurdles to clear in the future. Gaining competitive dominance in yet another industry sector may draw renewed attention from Congress members who already favor anti-trust legislation to level the competitive playing field. Such legislation could take the shine off the silver lining for prominent tech leaders and pose a much more formidable challenge to future fortunes than the Pandemic of 2020.