Amazon sees 22% growth in advertising services

Retail, technology – and increasingly advertising – giant, Amazon reported brisk growth in its advertising business in Q2 2023, as the business segment now swells to just under half the size of its AWS cloud business.

Why Amazon ads matter

No longer an advertising minnow among giants, Amazon’s sheer reach and irresistible proximity to the point of purchase has turned its advertising business into one of the most influential developments in recent media history, not to mention a big and fast-growing business for the everything store.

The details

• During an upbeat earnings report, in which the company grew overall revenues 11% year on year to $134.4 billion, the company also announced market-pleasing profit margin increase as the company showed it had brought pandemic-era cost increases to heel.
• Advertising remains a relatively small part of the overall revenue mix, having now reached $10.7 billion for the quarter, but it is currently the fastest-growing major business segment for the company having been able to maintain a +20% growth rate in each of the last six quarters.

Speaking on a call with investors, CFO Brian Oslavsky explained that “performance-based advertising offerings continue to be the largest contributor” to the segment’s growth.

Selling as a service

The deeper shift in Amazon’s business tracks the growth of third-party sellers on its platform – which now stands at 60% of the total unit mix – a strategy that indicates a progression toward the companying growing into a commercial layer throughout the internet.

Of course, it is more than just an ad-serving platform, as CEO Andy Jassy noted in a statement: the combination of significant media properties like the NFL’s Thursday Night Football alongside an enviably targetable signed-in audience means that the company is able to offer its services across the proverbial funnel.

The brand view

• While most of the growth in Amazon’s advertising business comes from performance, studies are beginning to suggest that the company’s advertising is capable of helping brand’s sales beyond Amazon.
• The will to spend on Amazon advertising is clearly high, but recent research from Tracksuit and WARC indicate that awareness scores remain vital to brands looking to perform on Amazon – effectively, performance is not enough.

In context

News of Amazon’s ad business growth comes amid a much murkier picture for the industry at large. For the major agency groups, a pullback in advertising spend from American tech companies, amid a wider spending slowdown, is beginning to weigh on their financial performance.

Sourced from Amazon, WARC, Seeking Alpha, FT