By Suzanne Vranica
Advertisers are starting to shift spending on search ads from Alphabet Inc.'s Google toward Amazon.com Inc., a sign of how the online retailer is capitalizing on becoming the top destination for consumers' product searches.
WPP PLC, the world's largest ad buyer, spent roughly $300 million on behalf of its clients on Amazon search ads last year, and about 75% of that money came from Google search budgets, according to people familiar with the matter. It spent between $100 million and $150 million on Amazon search in 2017, the people said.
WPP spent north of $3 billion globally on Google search advertising last year, one of the people said.
Omnicom Group Inc., another Madison Avenue giant, said between 20% and 30% of the dollars its clients spent on search advertising last year went to Amazon search ads, with the majority of the cash shifted from Google search budgets. The New York ad company spent about $1.2 billion on U.S. search ads last year, according to people familiar with its ad spending.
The shift in spending follows a major change in shopper behavior: While Google has long been the dominant player in online searches of all sorts, some 54% of people looking for a product now begin their search directly on Amazon, a jump from 46% in 2015, according to Jumpshot, a research firm that collects data from 100 million devices.
"Consumers are no longer double hopping between Google and Amazon, they just go straight to Amazon," said Scott Hagedorn, chief executive officer of Omnicom Media Group North America, the ad-buying division of Omnicom.
The search-ad dollars shifting to Amazon are from companies that sell products its platform, such as consumer packaged goods manufacturers and retailers, Mr. Hagedorn said.
Google and Amazon declined to comment.
Amazon still has a long way to go to catch Google, which had 78% of the $44.2 billion U.S. search-ad market in 2018, according to research firm eMarketer.
The firm doesn't have a precise figure for Amazon's search-ad revenue or how much it has increased, but estimates it will account for at least half of Amazon's $11.3 billion in overall ad revenue this year.
That would mean Amazon would take the No. 2. slot in U.S. search advertising, vaulting substantially ahead of Microsoft Corp., which is expected to have 6.7% of the market this year.
Spending on Google search ads continues to grow and is expected to be up 17% this year to $40 billion, according to eMarketer. However, Google's market share is expected to slip to 71% by 2020 as Amazon grows, according to the research firm.
Ad agency executives say Amazon's strength is its ability to tell advertisers if their ads have led to purchases on its site.
"The shift from Google to Amazon search is simple; Amazon has the audience, the transaction, and the loyalty to Amazon Prime, which clients can capitalize on," said Shane Atchison, chief executive officer of North American operations at WPP's Wunderman Thompson.
Amazon's advertising ambitions have steadily grown. Beyond search, it offers other opportunities for marketers including display ads, TV-like ads in live sports telecasts and targeted ads it serves to people as they travel around the web. Overall, it is now the third-largest digital ad player behind Google and Facebook Inc. -- the "duopoly" that combined controls about 60% of U.S. online spending.
Search ads on Amazon are called "sponsored ads," and companies bid in an auction-based system to have their product ads show up when a person types in a search term like "shampoo."