In September eMarketer reported that Amazon had climbed into third place in the U.S. online ad market. It has a 4.1% market share in contrast to market leader Google at 37.1% and Facebook at 20.8%.\u00a0 This is not a blip caused by a one-time tax accounting change. The research firm projects that in 2020, Amazon\u2019s share will climb to 7.0%, a growth rate of over 144%, while shares for Facebook and Google are expected to decline.\nAccording to PwC, online ads account for around $100 billion in 2018, making it the largest part of the U.S. advertising market in the U.S., about $30 billion larger than the TV ad market.\u00a0 It is projected to grow much faster than the TV market too, 7.7% versus 1.3% over the next 5 years.\nMore and more of the TV ad market is digital, taking advantage of new technology to personalize ads to the viewing audience.\u00a0 But digital is outperforming traditional TV ads \u2013 partly because of the weakness of the traditional TV business model \u2013 audiences are declining, lured away to ad-free video services like Netflix and Amazon \u2013 and partly because the digital ads are more effective at reaching the desired audience. \u00a0Traditional TV remains best for marketers seeking to launch a new product or seeking quick access to a mass audience, but for other marketers trying to find consumers as they are making purchasing decisions, digital is the right choice.\nAmazon is gaining ground\nAmazon\u2019s skill at getting an ad to a customer when they are about to make a purchasing decision partly explains Amazon\u2019s rise to number three. When a customer enters a search term on Amazon\u2019s retail site, the first search results returned are sponsored by marketers seeking to get their product in front of consumers at a key point in their decision-making process. Much of Amazon\u2019s digital ad revenue comes from these \u201csponsored product\u201d placements.\nMarketers are drawn to the online shopping site because that\u2019s where the shoppers are. Nearly half (46.7%) of US internet users start their product searches on Amazon, according to a May 2018 Adeptmind survey. Google\u2019s share is in the mid-30s.\nWith the wealth of data Amazon has on its own customers and on the customers of retailers who use its sales platform, Amazon is in a good position to fine tune its ads.\u00a0 With the added clues provided by product search information, Amazon is in an even better position to provide top of the line service to marketers.\nMoreover, Amazon has good information on whether the ads resulted in actual sales on its own site, thereby gaining a crucial advantage over other ad services that struggle to verify that their ads led to sales. According to one Amazon ad sales executive, \u201croughly 92% of shoppers who start their search for a product on Amazon end up purchasing that product there.\u201d\nThe competition is fierce and is heating up. According to industry executives, some clients who sell products on Amazon are moving between 50 and 60 percent of their allocated Google search ad dollars specifically to Amazon.\u00a0 Starting from a solid 4% share, Amazon has plenty of room to grow and challenge the two market leaders.\nDon\u2019t forget about Verizon\nOver the last few years, Verizon has been positioning itself to be a major challenger to Google and Facebook.\u00a0 In 2015, it bought AOL, and followed this in 2017 with a deal to acquire Yahoo. Together these properties generated 207.2 million unique monthly visitors in September 2018, which put them in fourth place behind Google, Facebook and Microsoft. Verizon merged these legacy ad platforms into a rebranded ad division called Oath and seemed set to use the combination of its own subscriber data, including their interactions with websites, and the huge audience of the older platforms tech to become a digital advertising powerhouse.\nThe expected ad competition from Verizon didn\u2019t really materialize this year.\u00a0 In fact, Verizon\u2019s ad performance was far worse that projections, with ad revenue declining 6.9 percent in the third quarter of 2018.\nThis shaky start might be attributable to the uncertainty created by the broadband privacy regulations that the Federal Communications Commission adopted in 2016 which would have required opt-in consent for the use of website information for ad purposes.\u00a0 Congress repealed these regulations in March of 2017, but the uncertainty over what rules would apply to the Verizon ad business was not really resolved until February 2018, when an appeals court finally ruled that the Federal Trade Commission had jurisdiction.\nBut the inherent advantages of Verizon\u2019s access to broadband subscribers and huge online audience suggest that it is only a matter of time before it becomes a major player in the online ad market.\nAT&T is on the move\nAt the same time, AT&T is seeking to enter the targeted ad business through its acquisition of Time Warner.\u00a0 Through its Turner division, Time Warner has some of the most popular cable properties in the market including CNN, TBS, TNT, Turner Classic Movies, and Cartoon Network.\u00a0 AT&T owns DirecTV, with 40 million subscribers, the second largest video distributor.\u00a0 It also has 130 million mobile smart phone subscribers and 16 million broadband customers.\nThe TV ad business is challenging.\u00a0 TV ad revenues are in decline \u2013 down an estimated 2% in 2018.\u00a0\u00a0 Audiences are dwindling for traditional video services such as broadcast and cable channels, and advertisers are seeking the accuracy of targeted digital ads.\nBut the combination of the AT&T and Time Warner offered a significant opportunity to increase ad revenue through merger and analysis of the separate AT&T and Time Warner data sets, thereby bringing to the TV ad business some of the targeting capabilities of digital advertising.\nBut in 2017, the Justice Department challenged the merger in court, arguing that the vertical integration of DirecTV and the Turner cable properties created competitive concerns that would increase subscriber prices.\u00a0 AT&T argued, among other things, that the merger would help them compete more effectively with Facebook and Google. The trial judge rejected the DOJ complaint in June of 2018, but the case is still under appeal.\nThis protracted legal struggle has delayed AT&T\u2019s efforts to bring the advantages of personalization to the TV ad business. As in the Verizon case, it is only a matter of time before this merger enables AT&T to play a much bigger role in the digital ad space.\nIf you think the digital ad business is lacking competition today, you haven\u2019t been paying attention.\u00a0 The fact is that for now two companies are winning, but the race is far from over. \u00a0Amazon is gaining ground and two of the biggest and most powerful companies in America are poised to get into the game for real.