Amazon's advertising business could reach $5 billion in revenue in 2018

Jeff Bezos Michael Seto/Business InsiderAmazon CEO Jeff Bezos.

Amazon’s advertising business could grow to $US5 billion in revenue in 2018, according to a note from Wall Street investment firm Morgan Stanley.

The firm estimates Amazon’s advertising business will grow by an average annual rate of 37% between 2016 and 2018.

Morgan Stanley analyst Brian Nowak said in the note: “We believe a majority of these ad dollars will come from large brands (Tide, Pampers, Energizer, etc) rather than individual third party sellers given brands’ superior unit economics and ability to drive repeat purchases.”

The note estimates the online retailer’s ad business could grow to $US7 billion in revenue by 2020. Even then, Amazon would make up only 4% of the entire online advertising industry in the US.

Nowak didn’t consider Amazon’s ad business a threat to Google’s search business, saying keyword search was growing more than product searches.

Sir Martin Sorrell, head of WPP, the biggest ad agency in the world, said on his company’s fourth quarter earnings call that Amazon was a significant threat to Google’s search business.

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