Will Amazon's spike in nabbing search ad dollars in US trickle down to Asia?

Google currently dominates the growing US search ad market, but according to eMarketer's latest study, its revenue will drop. The study, based on US consumers, reveals that the search ad market will grow nearly 18% overall this year to reach US$55.17 billion, and Google will obtain a 73.1% share of it. A player that has Google in its cross-hairs is none other than Amazon.

According to the eMarketer study, Amazon’s search business will grow nearly 30% over last year, boosting net search revenues to US$7.09 billion. Its share is forecast to be 12.9% this year, growing to 15.9% by 2021. In 2018, Amazon surpassed to become the second-largest ad platform for search in the US. Principal analyst of eMarketer Nicole Perrin said Amazon’s ad business has attracted massive increases in spending as advertisers can reach consumers during product queries conveniently at a time when they’re ready to buy. The global eCommerce company seems to headed towards overtaking Google in time to come.

However, this may not be the case in the Asia region. Steven Ghoos, managing director, Lion & Lion Singapore told Marketing that in Southeast Asia, rather than Google and Amazon, the conversation mostly gravitate around Facebook. "Most media is done through social media platforms such as Facebook and Instagram in the top list for advertising," he said. Meanwhile in China, it will be Alibaba and WeChat.

According to Ghoos, Amazon will need time to gather data points first in Asia, in order to have effective search ads in the region. He explained that while its reputation in the US may give it an edge in breaking specifically the Singapore market, there are strong local competitors in other countries. "Purchasing power is still low overall except in Singapore and Hong Kong, and current eCommerce players offer very cheap products," he said.

Echoing Ghoos, Sanchit Mendiratta, chief growth officer at Happy Marketer, a Merkle Company agreed on the dominance of local and regional players as online shoppers in Singapore have forged strong affinity with these brands.

"After two years of Prime Now, Amazon has only managed to carve out a lower single digit market share in grocery; and while there are a lot of opportunities and scope for Amazon to grow in Singapore, this space is still dominated by the local and regional players," he said. According to Mendiratta, while Amazon is best placed to grab search ad dollars, this will only impact movement of marketing dollars among eCommerce merchants.

"With the ever-growing avenues and channels of advertising for merchants, this seldom is a zero-sum game. I expect the overall spends to increase rather than merchants moving their ad spends from Platform A to Platform B," he explained.

However, for Google, outside of just eCommerce, search is big with a 95% market share. Emphasising the fact that most users' first page on the browser is still Google or Facebook, Mendiratta said that zooming in to the "walled gardened" eCommerce websites and apps shows that it will take time for Amazon to become the first preference for advertisers.

Sharing a different stance on this is Preetham Venkky, director of KRDS, who said that Amazon has 103 million Prime members in the US, adding that the large number of Prime members have ensured "stickiness" and increased regular usage. To Venkky, the eCommerce company has succeeded in becoming the default destination for purchasing any physical product. He added:

"If Amazon can replicate Prime’s success in Asia ensuring an increased monthly active user, then it’s inevitable that the company will slowly and steadily triumph over Google Search," he said. According to Venkky, such takeovers can be expected in other Asia markets as well.

Amazon first broke into Southeast Asia when it launched its services in Singapore two years ago. Rolling out its Prime Now membership and app availability to consumers in Singapore, the eCommerce company began to scale its operations in the country. Earlier this month, Amazon unveiled a dedicated online site and app for Singaporean consumers citing the online savviness of shoppers here. However, local eCommerce competition in Asia is strong with the likes of Alibaba-owned Lazada,  Zalora and others. Yet, Venkky is of the view that very few companies can compete with Amazon as the latter's cash coffers are "limitless".

"Beyond having a great product, it has used capital to break into markets and sustain its service and ‘best’ prices. Besides a few niche players, unless a competitor has deep pockets, I doubt they’ll be able to compete with Amazon in the long run," he said.

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