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Tuesday, 18 July 2017 17:13

Amazon: Dependent On Search Engines?

By: 

Summary

Google (and other search engines) are key suppliers for Amazon.

Amazon.com receives approximately 353 million to 478 million visitors to its website per month, for free, from search engines.

These customers come to Amazon at a low cost and offer large returns.

When looking at new investment opportunities I try to analyze the potential risks of a business model as much as I do the potential opportunities of the product and market. This month, I’ve been researching and considering starting a long position in Amazon (AMZN). Amazon is a difficult business to analyze from a quantitative, qualitative, and even emotional perspective. From first glance, Amazon looks to be a relatively undefeatable position. Moreover, I am an avid Amazon customer for everything from paper towels to renting movies on my smart TV.

 

Anyway, analyzing the upside in Amazon’s growth story is very common here on Seeking Alpha. And over the last few years, every Amazon bull is counting a large pile of chips. However, I have not been long Amazon and have missed the 350% upside over the last 5 years. In my own analysis, I'm working to determine if Amazon still makes sense at this level and valuation. In this article, I want to highlight one of the business risks I discovered in my analysis.

According to SimiliarWeb, Amazon.com acquires about 24.44% of its desktop website traffic from search engines. From there, 91.09% of Amazon.com’s search engine traffic can be considered organic, and 8.91% can be considered paid. For reference, “organic” just means that Amazon.com is receiving these website visitors for free from the search engines.

 

When analyzing a business, I believe that key suppliers are an important risk to consider. And after looking at Amazon.com’s customer acquisition strategy, I believe that Google (and other search engines) are key suppliers for Amazon. Moreover, these search engines are key suppliers of free customers.

According to Ahrefs and SimiliarWeb, Amazon.com receives approximately 353 million to 478 million visitors to its website per month, for free, from search engines. Search Engine Journal reports that Google controls 85.82% of search engine market share. Doing some simple math, we could estimate that Amazon.com receives approximately 357 million visitors from Google’s search engine per month.

Source: This article was published seekingalpha

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