Amazon's ad business tops $2bn per quarter

Amazon's leadership hinted at a potential video advertising offering in future

Amazon’s earned over $2bn from advertising services during the first quarter of the year, with company leadership describing it as a “bright spot” during its Q1 performance when overall revenue was $51bn.

The e-commerce and online content giant reported that overall revenue increased by 34% year-over-year to $51bn, with Amazon chief executive Jeff Bezos describing the growth of Amazon Web Services as "remarkable".

Although Amazon does not explicitly state how much it earns from its advertising services, the company reports this revenue stream in its “other” category as part of its net sales breakdown.

This portion of the business grew 132% during the period when compared to 12 months beforehand with Amazon's leadership confirming that advertising generated “the majority revenue in that line item.”

The steep revenue increase for this category is, in part, due to recent changes in how Amazon classifies its various revenue streams, with this particular category increasing by $560m year-over-year during the period.

Speaking on the company's subsequent earnings call, analysts were quick to inquire as to how its advertising offering was bolstering its overall financial performance.

Brian Olsavsky, Amazon, chief financial officer, said: “Advertising continues to be a bright spot both from a product standpoint, and also financially it continued to be a contributor for profitability in Q1.

Amazon leadership confirmed that it is a buoyant part of the business, in particular, its Sponsored Products offering in North America, and also hinted that further opportunities for video advertising products may emerge “over time”.

Olsavsky went on to describe its services as an opportunity for both emerging an established brands of “all shapes and sizes” eager to drive brand awareness, as well as those with more performance-based goals.

He added: “Our philosophy there, as we continue to find other valuable items, and to make advertising opportunities a better experience for customers – showing them new products that they may not have seen otherwise.”

Earlier this year, Amazon reported that advertising business grew 60%, with a report from Advertiser Perceptions published in the final quarter of 2017 noting that Amazon’s demand-side platform (DSP) is now the second most popular programmatic offering behind Google’s DoubleClick (see chart).

“Last year we tracked Amazon for the first time, and we were surprised that they showed up on par with Google,” reported Kevin Mannion, chief strategy officer at Advertiser Perceptions.

“It was anything but a fluke. They edged out Google as the most preferred DSP this year, and the two are at or near the top in all the categories that drive intention to buy.”

Speaking separately with The Drum, Mannion added: “Our data shows that advertisers are increasingly ready to shift down their spend in traditional digital search and [are] more likely to see alternate search opportunities. Amazon is one. And perhaps the most important.“

"Searching within the Amazon environment is essential to the data story that Amazon can share with marketers and agencies. And as the shopper leaves [its] walled garden, Amazon is able to track and retarget shoppers who have explored a product category and … considered contender brands.”

Speaking last year at Mobile World Congress, former WPP chief Sir Martin Sorrell, observed the rapid influence of Amazon in this area and spoke of its potential to rival current market leader Google.

“The gap between Google and Facebook in terms of our numbers has lessened, but Google is still of paramount importance. The threat to Google, which I discussed [with them] yesterday in San Francisco, is Amazon. It’s search on Amazon that is potentially the biggest threat,” he said.

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