Amazon's advertising unit is like a "pimple" that's set to "grow violently" in the near future, according to Sir Martin Sorrell, Chief Executive Officer of WPP, the world's largest advertising agency by revenue. While speaking on CNBC's Squawk Box last Friday, Mr. Sorrell reiterated some of his previous claims about how he's prepared to invest more resources into advertising on Amazon and expects other businesses to do the same going forward. The London-based company committed $200 million to advertising on the e-commerce platform in 2017, a small sum relative to the $2 billion it invested in Facebook and $5 billion committed to Google over the same period, yet the firm is now planning to pump $300 million into Amazon over the course of this year, Mr. Sorrell said.
While Amazon doesn't have a comprehensive online platform on which people spend over an hour per day like Google and Facebook do, the fact that a significant portion of its visitors are already prepared to spend money makes it an attractive destination for many marketers, WPP believes. As such, Amazon.com is possibly the world's most efficient platform for transactional advertising and as its grip on the e-commerce industry continues to strengthen, Mr. Sorrell expects its advertising business to follow. Some of WPP's clients are still skeptical about accepting Amazon as a major advertising platform with a global reach but have recently been changing their minds after seeing the initial performance of their marketing efforts, the marketing mogul said, specifically mentioning Nike as one such company.
Advertising still doesn't represent a major business for a conglomerate the size of Amazon but has the potential to eventually surpass the performance of the firm's cloud service, many industry watchers believe. As such, Amazon represents a direct threat to Facebook and Google even though its consumer-facing online solutions are much more focused. The company is also presently exploring monetization opportunities in the smart speaker segment which it dominates in the United States but has been reluctant to inject ads into its Alexa-enabled Echo devices so as to avoid annoying consumers, according to recent reports. After over two decades of operating at a loss due to its aggressive expansion, Amazon has recently been enjoying significant profitability for the first time in its history.