Will Amazon's bigger bite into digital ad dollars in the US be mirrored in Asia?

Amazon is expected to double its ad revenue in the next two years, increasing its stake in the digital ad spend market to 12% in 2020. According to a Cowen study, which surveyed 50 senior US advertising buyers last December, Amazon is predicted to obtain more digital ad market share by next year compared to other platforms, reported Recode.

On the other hand, the study predicted Facebook to lose about 3% of market share, while Google's and YouTube's market share are expected to drop by "a modest amount" through 2020. In the meantime, Instagram is predicted to see a 2% increase in market share, balancing out Facebook's loss.

Speaking to Marketing on the trend, Girish Menon, vice president, client development, [m]PLATFORM APAC, said in the Western markets, there are many consumer purchase journeys which now begin and end  all in the world of Amazon as the consumer already knows (or believes) that the product he/she is searching for is available on the platform. As such, they don't feel the need to conduct pre-purchase research using Google Search. This behaviour will seep into APAC markets where Amazon is present or growing (e.g. Singapore) and where consumers are becoming increasingly comfortable with online purchases.

"Naturally, advertisers will follow consumers. If consumers are spending more time on Amazon, then it would be natural to expect some percentage of advertising spends to be reallocated from Facebook and Google to Amazon," he said.

How much this would be, would however depend on the degree to which consumers increase their time (and money) spent on Amazon. Menon said that while ad spends could move away from Google and Facebook, it is likely to get fragmented across multiple eCommerce sites, as there are many strong eCommerce players across APAC, not just Amazon.

However, other industry players Marketing spoke to in Asia said that Amazon's growing impact in US is unlikely to have a huge impact in Asia in the immediate future. This was attributed to Facebook and Google dominating the advertising and marketing space with their "wider array of marketing solutions". That being said, Matthew Schone, chief product officer APAC, iProspect said there where there will be an increase in ad spend, is in eCommerce channels in Southeast Asia.

ECommerce websites make a "very compelling destination" for ad spend today as they own the point-of-purchase, and will continue to control a significant percentage of the e-commerce market share. While regional players in Southeast Asia such as Lazada, Shopee and Tokopedia still need to evolve their tech stack to support this shift, Schone said the industry is already witnessing the first phase of it, namely with Lazada Marketing Solutions.

"For brands, marketplace eCommerce sites are simply another channel that need to be evaluated when crafting a marketing strategy," he said. Schone added:

Agencies will need to develop competency in working with marketplaces so they can provide valuable, objective guidance to clients on where best to allocate their ad spend to meet business objectives.

Meanwhile, Omnicom Media Group's chief digital officer, Rochelle Chhaya said while Amazon might take the industry by storm and turn the duopoly into a trinity, it will not replace any of the players.

"Today, success for brands means reaching the right consumer at the right time, place and with the right message and context. As such, ad revenue for publishers is not just based on inventory, but on their ability to enable brands to become storytellers. And to do that, we need to know who we are telling the story to," Chhaya said. As such, data will play a "defining role" in whether Amazon will be successful in breaking the duopoly.

The news of Amazon's growing market share will require agencies to rethink their data and platform strategies to see where Amazon fits based on the data and inventory opportunities it offers. Chhaya said that while the duopoly remains strong from a video product standpoint, other advertising formats will feel the impact of Amazon "much quicker". Agencies will also be pushed to deliver higher value and more data opportunities, as clients will have more negotiation leverage for their budgets due to the increased competition that comes with a new player. Meanwhile, Chhaya said publishers require a clear data strategy and offering to compete with Amazon, as well as strengthen their core products and be very clear about the role they play in consumers' path to purchase.

Also weighing in on the issue is Simon Talvard, head of digital solutions, Reprise APAC, who said the "greatest risk" for the marketing community in Southeast Asia would be to view e-commerce and social commerce platforms such as Lazada, Qoo10 or WeChat as silos, when the opportunities lie in data, content synergies. He said that eCommerce and social commerce platforms are getting more spotlight, causing the region to become more fragmented as they build strategic partnerships with advertisers, Google and Facebook to disrupt the ecosystem.

"The most successful companies in the next few years would be the ones who develop agile strategies beyond website, apps, own, earned and paid media," he said.

The rise of Alibaba

Industry players also emphasised that the impact of Amazon's increase in total digital ad market share on Southeast Asia will not be immediate. Chanchal Chakrabarty, CEO, GroupM Malaysia told Marketing that specifically in Malaysia, Amazon is still "a small eCommerce platform" and will need to ramp up its capabilities and become a popular consumer brand before opening up on-site advertising opportunities.

He added that Malaysian advertisers have also started accounting for conversions as a marketing KPI and are still more focused on top-of-funnel activities. Interestingly in this part of the world, Chakrabarty said it might be Chinese e-commerce giants such as Alibaba that could potentially challenge the duopoly in Southeast Asia. This is due to Alibaba's investments and increasing control on Lazada, and can also be achieved by transferring its framework currently in use in China to Malaysia or other Southeast Asian markets where it is ramping up efforts. Also,

Alibaba has a strong returning consumer base and can use that as an opportunity upon which to build its advertising product.

"Given how e-commerce platforms in China are evolving to entertainment destinations with commerce built in, Alibaba might bring the same model into Lazada and that could then surely pinch ad dollars away from the duopoly," he said.

According to Chakrabarty, while the threat of dollars shifting is real, this is probably more so for search than social and content. Fundamentally, anyone who integrates content and commerce will win. And for Amazon to succeed, it will need to ensure the content library on the platform is big and competitive before it can start attracting ad dollars in the region.

Agreeing with Chakrabarty is Eunice Loh, digital and platforms director, Wavemaker global client solutions and SEA, who said that while this news could hint towards a start for Southeast Asian countries to diversify digital spend, it will take more time before Amazon becomes a sizable player in the region. Instead, advertisers are expected to take a more cautious approach in its paid offering, likely through a test and learn approach, as the prevalence of Amazon and its products in the US is not of the same scale nor familiarity for Southeast Asian consumers. Wavemaker's associate digital director Abhijeet Pradhan added that in Southeast Asia as major brands will prefer the duopoly for its substantial growth opportunities.

Prashant Kumar partner at Entropia said the market is " a couple of yours behind US" in allocating the spend towards eCommerce, but eCommerce players with vast amounts of actual purchase data offer a great opportunity at the lower funnel. This is especially so in categories with high share of online purchase, companies can’t afford to ignore this trend.

"Google and Facebook will continue to dominate the upper and mid funnel respectively. Lazada and Shopee have been less aggressive in this area than Amazon so far, but as they pick up their tempo in this area in coming years, we will see leap growth," he added.