Investing.com -- Amazon’s new retail advertising service is unlikely to have a meaningful impact on the company’s financials, according to a Citizens analyst in a note Thursday.

While the initiative could help attract additional ad spending, the firm said Amazon (NASDAQ: AMZN ) already dominates the retail media ad market, limiting potential upside.

"We expect AMZN’s retail media offering will help attract additional budget for retail media ad spending," said Citizens.

However, the firm noted that since Amazon already captures over 75% of U.S. retail media ad spending, the new platform is unlikely to drive significant near-term growth.

Citizens estimates the Amazon Retail Ad Service could provide a ~2% benefit to advertising revenue and less than 1% potential benefit to operating income.

The firm projects U.S. digital ad spending will grow at an 11% CAGR to $421 billion by 2027, with retail media ad spending expanding at an 18% CAGR to $86 billion.

However, they state that advertisers seeking diverse ad placements may not significantly increase their spending on Amazon.

Even if Amazon maintains its current market share, the new service could generate a $2 billion revenue opportunity by 2027, but Citizens sees this as a negligible impact on the company’s overall financials.

“Assuming 30% operating margins, roughly in line with ad-tech peers, would result in a potential $600M of operating income, which equates to 0.5% of our 2027E consolidated operating income estimate,” Citizens explained.

Despite the limited financial impact, the firm remains encouraged by Amazon’s ongoing efforts to expand its advertising business.

Citizens maintains its Market Outperform rating on Amazon with a $285 price target, citing the company’s unrivaled consumer data and continued focus on monetization opportunities.