Forget Facebook and Google: The ad world thinks this tech giant is 'terrifying'
Amazon has WPP CEO Martin Sorrell shook.
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The mad men and women of the ad industry have plenty of reasons to toss and turn at night.
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Money is increasingly trickling from television commercials to digital media — a market that Facebook and Google currently have in a duopolistic chokehold. Inter-agency competition is at a fever pitch. Unconventional upstarts are eating their lunch. If Don Draper were around today, there's a good chance he'd work at Facebook.
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But it's not internet advertising giants that keep the industry's top chief up at night. Nor is it his three-month-old daughter.
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It's...Amazon?
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"It's Amazon, which is a child still, but not three months," WPP CEO Martin Sorrell said of the source of his insomnia during an earnings call this week. "Amazon's penetration of most areas is frightening, if not terrifying to some."
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Yes, Sorrell, who heads the monster British parent company of Madison Avenue's biggest-name agencies, said he's most afraid of a shopping site with a relatively dinky advertising operation.
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And his concern is justified. Amazon has been quietly beefing up its ads business for months, according to various reports.
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Assuming it continues to do so — and it's shown no indication that it won't — the potential shockwave should indeed scare industry incumbents.
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While Amazon's ads currently comprise less than two percent of the digital market — Facebook and Google collectively control two-thirds — its most recent earnings release last month revealed that ad revenue grew the most of any part of the company for the quarter — a 60-percent jump from the same period in 2016.
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In fact, research firm Emarketer projects that Amazon will generate more than $1 billion in U.S. ad revenue this year — slightly more than its prediction for newly anointed Wall Street darling Snapchat, which is first and foremost an advertising-based business (despite its "camera company" spin).
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When an analyst asked in Amazon's earnings call about long-term advertising plans, Amazon's chief financial officer Brian Olsavsky said only that it was "very early" and it seemed like a "good strategy," according to Business Insider.
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As Sorrell went on to say, Amazon's ambitions could have an enormous impact on the current industry order.
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Advertising online is a numbers game — both in terms of people reached and knowledge of who those people are. Facebook and Google are successful at it because they've been able to log information on your online habits for years and steer their ads accordingly.
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Amazon has its own war chest of data culled from millions of customer searches, purchases and even music and video streams. Shoppers might browse for products on Google, Sorrell said, but Amazon's dominance of the e-commerce market means it knows more about people's consumption choices than anyone in the world.
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That's of course particularly valuable information to advertisers looking to lock down online sales. It's the kind of awareness Facebook, Google and other digitals platforms have been trying to master for years with features like buy buttons, real-world store receipt-matching and shoppable ads.
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Yet their crutch — Google's in particular — has always been that people still tend to leave the platform when they actually want to buy things. Amazon doesn't have that problem.
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Sorrell is of course also wary of Facebook and Google's intimidating power. But he said the company's business relationship with each made them more "frenemies" than antagonists.
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Agencies work with the two companies to place ads for clients, but they also compete with the tech giants' in-house creative shops and other means of undercutting the middleman.
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Sorrell ranked Amazon as the least friendly of the three but qualified that it's still early days. The company also recently set up a Seattle agency specifically to deal with Amazon, he said.
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Because, as they say, keep your friends close, and your frenemies closer.
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