Amazon strategy to generate profits through advertising

Amazon strategy to generate profits through advertising
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Courtesy: PTI

Seattle/San Francisco: The investors in the Amazon.com Inc have found comfort in the company’s cloud business which has become profitable after reportedly sacrificing profit for growth by investing in logistical units.

The marketing platform in which Amazon has been quietly investing will reap benefits for the company due to large size of its audience. The advertising platform will be generating healthy returns to the company, with the investors betting on cloud business pushing the shares past $1300.

According to a News article published in Livemint, On the basis of ad business growth, the BMO Capital Markets upped its Amazon price target to $1,600 a share.

According to predictions of some analysts, Amazon will reach $2,000, making it the first company with a $1 trillion market value.

Previously, Amazon has kept advertising on its site, precise in nature. But, now the e-commerce giant is expanding its advertising business.

Ali Baba group, a Chinese company, gets half its revenue from ads.

Jay Kahn, a partner at Light Street Capital, says that “Advertising is the most profitable business in the world.” He further said that “For Amazon, advertising is going to be more profitable than its cloud business.”

According to EMarketer Inc. “by 2021, advertising on websites and mobile devices will account for half of all ad spending in the US, capturing greater share than television, radio, newspapers and billboards combined.”

The marketing professor, Scott Galloway, from New York University’s Stern School of Business, says that “Similar to the candy and magazine racks, which are the most valuable space in the store, Amazon is the most valuable space on the web because you are at the very bottom of the funnel,” and he further added that “Not only are people about to make a purchase, but you know what’s in their basket. It’s hard to imagine a more target-rich medium than Amazon or robust offering.”

Moreover, the ad money going to Amazon isn’t necessarily being redirected from Google.