Amazon’s Online Ad Business Grows Thanks to Apple’s Privacy Changes

Amazon Picks Up Business From Facebook

Amazon’s (AMZN) online advertising business is growing, partially due to Apple’s (AAPL) recent changes to its privacy policies. Running ads on Facebook (FB) has become less effective since the iPhone maker’s new privacy changes went into effect in June, which is prompting marketers to shift dollars to other destinations like Amazon.

As it stands, Amazon, which was late to invest in digital advertising, only controls about 10% of the market. However, advertising is one of Amazon’s fastest-growing segments. Revenue in Amazon’s “other” category, which mainly consists of ad sales, increased 87.5% during the second quarter of the year. Facebook’s ad sales also saw growth, but not as much as Amazon’s. The social media giant saw ad sales gains of 56%.

Apple Privacy Changes Hurt Facebook

The idea of Amazon chipping away at Facebook’s online ad sales would have been met with skepticism a few months ago. After all, Facebook has more than 2.8 billion active monthly users and social media has been a coveted place to reach potential and existing customers.

But Apple’s new privacy rules changed everything. Users have to opt-in to allow apps to track their internet behavior, which they say yes to tracking about 25% of the time. Facebook warned investors about these trends when it reported second-quarter results, saying Apple’s changes could hurt its full-year growth.

Brands Look Elsewhere

Brands which are shifting advertising dollars to Amazon and away from Facebook point to the privacy changes as a big reason for their decisions. Vanity Planet, which sells home spa products, slashed the amount it spends on Facebook by 22% in 2021, with half of that going to Amazon. Meanwhile, Shinesty, an underwear company which sells direct-to-consumers, is also increasing the money it spends on Amazon and keeping its budget on Facebook the same as it was last year.

Facebook is still a dominant player in online advertising, but Amazon is looking more attractive to marketers. It will be interesting to see how this fight plays out in the digital ad market which is valued at $191 billion, and growing.

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