Dive Brief:

• Amazon's growth into a digital advertising giant will threaten Google and Facebook, transforming their current "duopoly" status into a "triopoly," Forrester Research said in a new report shared with Marketing Dive. Ad agencies and ad-tech firms also will need to adapt as the e-commerce giant follows its long-term strategy of eliminating middlemen that hinder efficiency.
• Media and ad agencies will benefit from Amazon's emergence as a third major digital ad platform, although they must develop expertise in running campaigns on its properties. Agency holding companies are acquiring firms with Amazon-specific expertise to build out these capabilities. The e-commerce giant is adding more self-serve ad features, but agencies still have a role in helping marketers manage their campaigns among a growing variety of retailer media networks, including those being developed by Walmart and Target, per Forrester.
• Ad-tech vendors need to partner with Amazon or prepare to compete with the company as it develops in-house services for advertisers. No single ad-tech vendor can plan, create, buy, measure and optimize ads among channels and mediums, giving Amazon an opportunity to fulfill a much broader role in ad-tech, the report says.

Dive Insight:

Amazon's growing ad business not only threatens rivals like Google and Facebook, but also will affect marketers, agencies and ad-tech vendors that aren't prepared for significant disruption. Amazon has upended a wide variety of industries, including almost every category of retail, with relentless innovation and keen insights about its customers. The company can harvest that information for ad targeting when its customers are most ready to buy products and services.

Amazon's share of global digital ad spend will grow to 8% by 2023 from 3% last year, per a separate report from Juniper Research. To support that growth, it's recruiting account managers, programmatic advertising specialists and engineers worldwide, according to job listings on its site.

Meanwhile, Google and Facebook are working to diversify their revenue with their own pushes into e-commerce as Amazon becomes a greater threat. As Forrester notes, Amazon doesn't necessarily "need" its ad business. Ad sales comprise only 4% of Amazon's revenue, compared with 94% for Facebook and 85% for Google, suggesting that Amazon still has significant room for growth. The pressure on Google and Facebook will mount as the growth rate of the global digital ad market steadily declines from 21% last year to 8% by 2023, per eMarkter forecasts. By the end of the next decade, the digital ad market likely will reach a stage where it can't expand beyond the confines of a broader ad market whose growth rate is in line with the global economy.

Media and ad agencies will need to adapt to Amazon's growing ad presence as the company leverages its 47% share of U.S. e-commerce sales into other services. Agencies have an opportunity to develop expertise in Amazon advertising, or to acquire that know-how by buying Amazon-specific agencies. Ad holding company WPP in 2017 acquired consulting firm Marketplace Ignition to expand its Amazon-related business, which is one example of how traditional agencies are adapting to Amazon's growth as an ad platform.

Agencies also can develop consulting expertise to cover the broader e-commerce ad market as retailers like Walmart and Target expand their own media networks. The retailers will have more robust self-serve ad tools by the end of this year, giving brands more options, per Forrester. Walmart in April acquired Polymorph Labs to expand its ad services, while Target in May rebranded its Target Media Network to Roundel as part of an expansion into deeper ad integrations on Target.com and 150 other "brand-safe" platforms like Pinterest, PopSugar and NBCUniversal.

Ad-tech firms face the biggest threat from Amazon, which sees an opportunity to create an omnichannel service that combines its programmatic demand-side platform (DSP), search ad tool, customer data and ad-serving service into a one-stop shop of data and ad buying, per Forrester. Amazon this year acquired some of the assets of Sizmek, an ad platform that had filed for bankruptcy, to build out its ad services. The e-commerce giant also is beta testing an attribution solution for ad placements among a wider variety of channels. Ad-tech vendors still have a role in helping marketers with ad placements on Google and Facebook's rival platforms, Forrester says.