Digital Transformation Ad Spend Adtech

For the first time, Amazon reveals $31.2bn revenue from advertising

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By Chris Sutcliffe | Senior reporter

February 4, 2022 | 9 min read

In its latest earnings results, the extent of Amazon’s advertising revenue was broken down for the first time.

Amazon has been referred to as the third member of the triopoly for years now. Along with Google and the stumbling Meta, it has been speculated to be one of the advertising giants – and with the added advantage of greater data on its users’ purchase journey than the others. But a figure has finally been put on it.

According to the retailer’s full-year results for 2021, it generated $31.2bn in revenue from advertising alone. That is still relatively small compared to the other members of the triopoly; Google Services, which includes Google advertising, brought in $69.4bn in revenue in the fourth quarter of last year alone.

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Amazon, Snap and Pinterest are using their own strengths to grow beyond the duopoly’s reach

However, Amazon’s advertising revenue is now significantly larger than that of Microsoft, in addition to other challengers including Snap and Pinterest. It is also comparable to the advertising revenue of the entire global newspaper industry.

More interestingly, however, is how advertising compares to the other revenue streams within Amazon. It generates more revenue than that of its subscription services, for example, despite accounting for only 7% of the total revenue of the group. It speaks to the effectiveness of Amazon’s ad placements at the top of search results, in addition to its other units available on some of its physical devices.

Ryan Cook, managing director UK of Criteo, suggests that Amazon is considering expanding its advertising strategy, potentially beyond the narrow bounds of its own ecosystem.

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“Advertising is a huge part of Amazon’s services business. We’re now seeing something of a revolution among ‘traditional’ retailers like Asda, Tesco and Boots, who are now investing heavily in monetizing advertising inventory across their domains,” he says.

“As these offerings rapidly mature, with more niche retailers bolstering the supply for advertisers, it will be interesting to see how Amazon responds and whether it sticks to an entirely closed ecosystem approach.”

It is also possible that Amazon broke out the advertising data for the first time in response to changing digital advertising rules that favor it. The retirement of the third-party cookie means Amazon’s own data on user journeys is extremely valuable – particularly as the e-commerce boom continues.

Aaron Goldman, chief marketing officer at Mediaocean, argues: “Amazon continues to expand its role in the marketing ecosystem and, for the first time, revenue for advertising services was broken out in its earnings report to the tune of nearly $10bn in Q4. Anchoring on the company’s position as the point of purchase for a wide array of products, Amazon captures valuable data that is unique to its platform.

“Over time, the scale of consumer signals within Amazon’s walls will create more value as advertising shifts to first-party cookieless targeting. To ensure brands retain control in a world of walled gardens, marketers are adopting independent technology that can operate across platforms.”

That’s supported by a statement from Amazon’s finance chief Brian Olsavsky during a conference call following the results, which spoke to the effectiveness of contextual advertising: “I’m excited to continue innovating in areas like sponsored ads, streaming video and measurement. Of course advertising only works if we make it useful for customers. When we create great customer experiences, we build better outcomes for brands.”

That proprietary data is also seen as a key factor in the success of brands such as Pinterest, which is speaking to advertisers using its own access to audiences’ purchase journeys as leverage.

It was also noted on the call that a large proportion of overall ad spend is tied to its e-commerce offerings, with Prime Day noted as a key date.

Outside advertising

For the most part Amazon’s results highlighted the investment it is making in its Prime subscription services, and the original content it is commissioning for Prime Video. That, it suggests, justifies the increase in Prime cost over the next year. Between Prime Video and the further investment in content for Twitch subscribers, it suggests that Amazon is broadening its content division in service of having other advertising formats.

Amazon Web Services (AWS) also compared favorably to its advertising revenue, with ‘extraordinary growth’ of 40% year-on-year.

Snap also announced strong results on the same day as Amazon, revealing it is solidly profitable for the first time. However, at $4.2bn in total revenue, it is dwarfed by Amazon’s advertising revenue.

The two do not directly compete in terms of advertising format, with Snap investing heavily in augmented reality (AR) lenses that are unique to its platform. Of the results, Andre Hordagoda, chief executive officer and co-founder at Go Instore, says: “Snap’s impressive Q4 2021 results are proof that its camera-first approach, early investment in AR technologies and exciting brand collaborations are helping the platform reclaim its competitive edge, following disappointing Q3 2021 results.

“The age of social commerce is now upon us, and Snap was smart to get involved in the early stages. However, as we saw with Meta’s disappointing results this week, there are other players disrupting the social-platform status quo and nipping at the heels of the established mega-platforms.”

Goldman also notes: “Snap’s first profitable quarter is a testament to the unique utility it provides to consumers and advertisers alike. The platform offers an engrossing combination of content and communication that is very sticky with gen Z. For advertisers that want to reach this elusive audience, Snap is a core component of the media plan. And, with native ad formats that fit the Snap experience, advertising on the platform is compelling for brand and direct response initiatives.

“Looking ahead, brands will have to work harder to stand out on the platform and leverage tools for creative personalization so that each person sees an ad that is tailored to his or her interests.”

The retirement of the third-party cookie is a blessing in disguise for the platforms that have strong proprietary user data or unique purchase funnels from the initial ad. While the challengers such as Snap and TikTok have a way to go before they can claim parity with the digital advertising giants, Amazon is confident that its own advertising growth entitles it to a seat at the high table with Google and Meta.

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