Amazon Challenges Google for Online Advertising Business

By Alanna Smith

Amazon has already begun expanding into everything from mobile payment to book publishing. It was only a matter of time before it went after Google's longtime hold over the online advertising business.

According to the Wall Street Journal, Amazon.com is getting ready to move into the world of online marketing with a product that's likely to resemble Google AdWords. Google pulls in $50 billion a year from marketing like AdWords, which places ads tailored to the user's interests alongside search results.

Amazon's new product is expected to perform a similar, keyword-based service, along with a bulk-buying tool for advertisers looking to boost their visibility. Reportedly, the system will increase Amazon's ability to place advertisements on third party sites and may become available later this year.

Amazon does have at least one advantage over Google. Since Amazon is an online retailer, it has more access to purchasing data than Google. Amazon had 250 million active users as of the second fiscal quarter in 2014, and access to their buying and selling trends may give Amazon the edge it needs to make their ads as effective, or more effective, than Google.

That doesn't mean Google won't be a major competitor. Google has a head start of 14 years on Amazon, and the large share of the market Google controls gives the company considerable power over pricing trends. AdSense has drawn in over a million advertisers since it was launched in 2,000, selling limited ad space to marketers.

If Amazon can compete with Google, the new service could be a good opportunity for the company to increase its profitability, especially since its gross margins have been low in recent years compared to other internet giants like Google and Facebook.

Amazon's service will likely be good news to marketers stumped by SEO obstacles like Google Penguin and Google Panda. SEO is often used either as an alternative or supplement to pay per click campaigns and measures like AdWords to get a client's site to show up in the top results organically. It's unknown how Amazon's service may tie into SEO.

Amazon's gone toe-to-toe with Google before, entering the smartphone market with its Fire Phone that competes with Google's cloud computing, and Google Shopping Express threatened Amazon's longtime hold on the e-commerce market. Only time will tell if Amazon can compete with Google for online advertising.