Amazon Case: Your Plan to Be Profitable Is Called Advertising

 In recent years, Jeff Bezos and company have quietly put together a marketing platform that allows Amazon to make money from the enormous size of its audience.

 For more than two decades, Jeff Bezos - as is well known - has sacrificed profits for growth, persuading Wall Street that it was better for Amazon.com Inc. to invest money in the logistics that have turned his company into the Wal- Mart from the web.

More recently, investors have found comfort in the company's profitable cloud services business, which has helped offset losses in e-commerce. However, over the past five years, Amazon's average profit margins   have declined by about 1%.

Now comes a business that could generate steady and profitable returns: it's called advertising. In recent years,  Jeff Bezos  and company have quietly put together a marketing platform that allows  Amazon to  make money from the huge size of its audience.

Having gambled on Amazon's cloud services and sent stocks topping $ 1,300, investors are now rubbing their hands in the ad business, which doesn't require major investments in new data centers or media centers. Dispatch and that generates juicy margins.

On Monday, BMO Capital Markets raised its price target for Amazon to $ 1,600 a share, based largely on growth in the ad business. Some analysts project Amazon to hit $ 2,000, making it the first company with a market value of $ 1 trillion.

"Advertising is the most profitable business in the world," says Jay Kahn, a partner at Light Street Capital, who notes that Chinese e-commerce giant Alibaba Group Holding Ltd. derives more than half of its revenue from advertisements. "For Amazon, advertising is going to be more profitable than its business in the cloud." Amazon declined to comment.

For years, Amazon subtly kept advertising on the site for fear of alienating shoppers who had become used to choosing what to buy based primarily on price and customer feedback.

Amazon has slowly been giving sponsored products a higher ranking in search results, forcing brands to buy ads to earn top placement. Is easy to see why.

By 2021, advertising on websites and mobile devices will account for half of all ad spend in the  United States , capturing a larger share than television, radio, newspapers and billboards combined, according to EMarketer Inc.

So far, that change has mainly benefited Google and Facebook. By contrast, Amazon has a tiny ad business that generated $ 1.7 billion in revenue last year, according to EMarketer, which compares with Google's $ 35 billion and Facebook's $ 17.4 billion.

But it is growing rapidly, because companies like Procter & Gamble and Mondelez see Amazon as the place to win "digital space" in the same way they fought to win space on supermarket shelves.

Amazon has an advertising platform that no other company can match: an online store that sells hundreds of millions of products combined with a real-time entertainment service and a wealth of data on customer preferences.

Amazon attracts 180 million visitors in the US each month, all or most of them with purchases in mind. And as more people shop on smartphones, search engines like Google are skipping over with the Amazon mobile app.

Advertisers are paying attention. Just as the big brands lobbied their ad agencies a few years ago to come up with plans to get the most out of the money spent on ads on Google and Facebook, they are now demanding an "Amazon strategy."

In November, advertising giant Omnicom Group set up a specialized operation just to direct advertising dollars to e-commerce, particularly Amazon, forcing consumer brands to reevaluate marketing decisions.

"It's wreaking havoc on traditional retail models," says George Manas, President of Resolution Performance Marketing at Omnicom.

In negotiations with advertisers, Amazon is touted as a better ad spend than Google's search engine and Facebook's social media platform  , as people at Amazon want to buy, according to three people familiar with the negotiations.

“Like the shelves of magazines and candy, which are the most valuable space in stores, Amazon is the most valuable space on the web, because it is in the very buying phase,” says Scott Galloway, professor of marketing at the Stern School of Business at New York University, and author of The Four: The Hidden DNA of Amazon, Apple, Facebook and Google (The four: the hidden DNA of Amazon, Apple, Facebook and Google).

“Not only are people about to make a purchase, but you also known what's in their shopping cart. It's hard to imagine a more target-rich medium than Amazon or a more robust offering. " Furthermore, if you are seeking Ungating Services then must consult with professionals.