Amazon gearing up to challenge Google in lucrative online ad business

Look out, Google: A new report says Amazon has ambitions to become a significant competitor in the highly profitable business of helping other companies place ads on a variety of sites around the web.

It’s another example of giant Internet companies bumping into each other as they keep expanding into new businesses. Google and Amazon are already battling to be the first place that consumers go when they want to shop online. And they’re also competing in next-day delivery service, commercial cloud computing and even smartphones.

Now the Wall Street Journal is reporting that Amazon is building a new ad-placement system that would initially help advertisers buy space on Amazon’s pages – geared toward the keywords entered by shoppers searching for different products – with an eye toward eventually placing keyword-targeted ads on other sites around the web. That’s the business model that drives the biggest part of Google’s nearly $60 billion in annual revenue.

Amazon would like some of that highly profitable business to balance out the thin margins that it sees in its core retail operation, according to the Journal, which notes that Amazon may be able to leverage the information it has about the likes and habits of 250 million online shoppers.

As IDC analyst Karsten Weide told the Journal:

“Amazon could use the data it has about buying behavior to help make these ads much more effective … Marketers would love to have another viable option beyond Google and Facebook for their advertising.”

The online ad business is exploding right now: Facebook is also preparing to expand its capabilities for selling display ads on its own network and other sites, according to a new report in The Information, while Advertising Age reports that Yahoo is also offering new kinds of so-called “native advertising” on other sites.

Google isn’t sitting idle, however. It’s been building the capability to offer ads for app developers, which let web users simply click to download and use new apps. Similar ads have been a big source of mobile revenue for Facebook, and Google announced today that it will offer those ads on its Search and YouTube pages.

(AP photo by Reed Saxon shows Amazon CEO Jeff Bezos in 2012)


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