Amazon has acquired Sizmek ad server and Sizmek Dynamic Creative Optimization (DCO) for an undisclosed amount. In the announcement, the e-commerce giant said Amazon Advertising and Sizmek shared many mutual customers, and that the two entities will continue to operate independently for the time being.

Amazon has acquired Sizmek ad server and Sizmek Dynamic Creative Optimization (DCO) for an undisclosed amount. In the announcement, the e-commerce giant said Amazon Advertising and Sizmek shared many mutual customers, and that the two entities will continue to operate independently for the time being.

Amazon generates revenues from retail sales, third-party seller services, subscription services, Amazon Web Services and other operations including advertising sales. The company reported total revenues of $233 billion in 2018, grew 31% on the same period the year before.

Sizmek is an advertising solutions company with operation in more than 70 locations globally. It filed for bankruptcy with over $64 million in claims in March this year, creditors were mainly ad exchanges. In April 2019, the company sold its data management and demand-side platforms to marketing technology company Zeta Global. 

Our analysis

Advertising revenues are taking up more share in Amazon’s revenues. Amazon reports advertising revenues as a part of ‘other revenues’ and in 2018 the category grew, 117% to $10 billion in 2018 However, it only accounted for 4% of the e-commerce giant’s total revenues, compared to Google and Facebook, whose advertising revenues represented 86% and 99% of total revenues in the same period of time.

Prior to Sizmek, Amazon has invested in many companies for different capabilities, however, this is the first one for advertising solutions. Among others, it invested in lifestyle video network Tastemade in October 2018, its online payment service Amazon Pay in India through several funding rounds in 2018 and acquired autonomous vehicle delivery Dispatch in February 2019.

Sizmek acquisition is yet another indication of Amazon’s commitment to its advertising business. In 2018, Amazon consolidated three separate business units, Amazon Marketing Services, Amazon Media Group, and Amazon Advertising Platform all under one umbrella, Amazon Advertising, to eliminate silos.

The acquisition of Sizmek ad solutions will allow Amazon to further monetise ads by leveraging users’ profiles generated from its e-commerce platform. Amazon generates more than half of its revenues ($123 billion) from online stores where a considerable amount of data on what consumers search, buy, as well as their location, is stored daily. Sizmek Dynamic Creative Optimization’s capability to create targeted ads will help leverage the data for further monetisation.

Though Amazon’s advertising revenue is dwarfed by Google ($95 billion) and Facebook ($55 billion), its proposition as an e-commerce platform is attractive to marketers whose key targets are keen shoppers. Amazon users often browse with high purchasing intent and thus, higher conversion rates. If leveraged appropriately, Amazon’s direct sales data will be useful to advertisers for better campaign measurement.

With this acquisition, we expect Amazon’s advertising to grow rapidly in the next five years; however, we do not expect it to overtake the duopoly in the short term. Data utilization and sharing with advertisers will be Amazon’s key differentiator in the advertising race.