Jul 16, 2019 - Economy

The rise of online marketplaces

Madison Ave. in a shopping cart

Illustration: Aïda Amer/Axios

A new report from GroupM's Brian Wieser, one of the top advertising industry analysts, finds that large online marketplaces account for a majority of e-commerce activity and are growing as a percentage of e-commerce activity at a faster rate than direct-to-consumer (D2C) brands.

Why it matters: Following e-commerce trends is important in understanding what shapes the media industry because of the ripple effect it creates in the types of advertising growth.

How it works: Online marketplaces like Amazon have become media owners themselves, and generate online ad revenue — mostly by expanding their search capabilities — from the manufacturers and brands they work with.

  • This is likely helping the bigger search ad market, because marketplaces need to drive traffic to their websites, Wieser argues.
  • By contrast, D2C brands typically spend much more on social platforms and with influencers.
  • Because D2C companies are experiencing slower revenue growth than marketplaces, Wieser argues that this could have a decelerating effect on certain social channels, but it will likely be offset by the fact that direct brands will begin to spend a greater percentage of their revenue on advertising.

Be smart: In a new piece for Bloomberg Opinion, Shira Ovide wisely points out that investors wrongly treat Amazon's $11 billion advertising sales business as a standalone operation akin to Google, when in reality, Amazon's ads are an added fee for sellers on Amazon.

What to watch: As Amazon Prime Day rolls into its second day Tuesday, some of its competitors may see a lift in online shopping, Axios' Erica Pandey reports.

Go deeper: E-commerce is upending Madison Avenue, led by Amazon

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