Amazon’s Advertising Business Surges by 87% To Nearly $8 Billion

Key Points:

• Amazon’s “Other” category which primarily includes sales of advertising services, as well as sales related to other services offerings, grew a whopping 87% Y-o-Y in the Q 2.
  

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• Amazon CFO Brian Olsavsky noted that the advertising business is a part of the company’s ‘flywheel’.
  

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• He further cited on a media call that new products and functionality for factors like high demand, click through, and high bid rates.
  

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• Amazon’s grabbed a 10% share of the entire U.S advertising market and is anticipated to rise further as trends show that online shopping is here to stay.
  

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Amazon’s advertising business continues to surge, becoming one of the key sources of revenue for the company. The company said its ‘Others’ category generated sales of $7.9 billion, up a whopping 87% from Y-o-Y in the second quarter. The rate in the year-ago quarter was 41%.

The e-commerce giant’s ‘Others’ umbrella is led primarily by advertising as well as includes cloud computing and subscription arms. Amazon recorded total retail sales of $ 113 billion, an increase of 27% Y-o-Y. On the other hand, Amazon Web services and cloud computing products displayed robust growth as the sales grew 37% Y-O-Y.

Advertising is a high-margin business that contributed highly to Amazon’s profits. According to e-Marketer, Amazon’s share of the US digital ad market exceeded 10% last year, strengthening its position as the No. 3 ad publisher. 

In its earnings release, Amazon offered some insights into the progress of the advertising side of the business,

 “Amazon Advertising launched over 40 new features and self-service capabilities, making it easier for sellers, companies and authors to grow their businesses by helping customers discover their brands and products.

Recent launches include regional sponsored product campaign creation tools; access to educational, technical, and marketing resources via the Partner Network; and a simplified creative asset management solution.”

Furthermore, it said it also expanded the services in Australia, Europe, India, Japan, and Saudi Arabia, creating more opportunities for local and global sellers and brands.

Though the pandemic has affected certain segments of advertising spend, digital advertising has gained immense momentum due to online shopping trends. Amazon has also benefited from it but majorly generate its ad revenues from charging companies to promote their products on Amazon’s online marketplace.

Amazon also drives ad revenues from the online streaming businesses with Fire TV, IMDb Tv, and Twitch. Recently, the IMDb TV streaming service inked a licensing deal with Universal Filmed Entertainment Group. The company also announced it will exclusively stream Thursday Night Football, further boosting Amazon’s streaming ad ambitions. The e-commerce giant noted that it reaches 120 million monthly viewers on Amazon streaming services.

To maintain the momentum, Amazon has also launched bonus programs for merchants and made some of the privacy-related changes affecting the digital ad world.