The growth of Amazon’s advertising market will excel its cloud computing business by 2021, according to analyst Michael Olson.
Olson estimates Amazon’s ad business to grow US$16billion in 2021 while believing Amazon Web Services will reach US$15billion.
He also says the American electronic commerce and cloud computing company’s market share is “well above 50%”, according to CNBC. This theory came to light over Amazon’s ad business sales growing 72% in its second quarter.
“While the Street has been focusing on the trajectory of core retail, the growth of AWS and new categories such as grocery and pharma, Amazon’s advertising business has been quietly growing into a massive driver of current and future profitability,” Olson said in a note to clients Monday.
“By 2021, we believe it is likely that advertising operating income will exceed AWS. Investors should be focused on Amazon advertising now; this is a major driver of results and valuation today and continuing in the coming quarters and years.”
He also notes to CNBC that “advertising will be a driver to watch, as the retail industry continues to live or die by the shift to direct-to-consumer and digital channels”.
Written by Leah Alger