When most people think of Amazon, they typically associate it with its e-commerce retail business and its domination in cloud computing. However, in recent years, Amazon has quietly established itself as one of the world’s largest online advertising players.
According to a recent earnings report released just yesterday, Amazon’s online advertising business continues to thrive, even in the face of growing concerns among investors about geopolitical tensions and the ongoing Israel-Hamas conflict, which has the potential to negatively affect the global economy.
In their latest financial results for the third quarter, Amazon announced that their advertising division generated $12.06 billion in revenue, representing a significant 26% increase compared to the same period the previous year, CNBC reported. Analysts polled by StreetAccount had expected the third-quarter revenue for Amazon’s advertising business to be around $11.6 billion.
Back in 2012, Amazon launched the Amazon Ads Platform (AAP), a programmatic solution enabling brands to target shoppers both on and off Amazon using display and video ads. Since then, Amazon’s advertising business has become its fastest-growing division for the past two quarters.
In the second quarter, the revenue for the advertising division saw a 22% year-over-year increase, reaching $10.7 billion. What’s noteworthy is that ad sales have even surpassed Amazon’s subscription revenue, which includes income from Prime members who pay $14.99 per month.
This surge in Amazon’s advertising prowess has led some to draw comparisons with other tech giants like Google. While Amazon began offering pay-per-click ads in search results in 2012, the company only started reporting advertising as a separate category in its fourth-quarter earnings report in 2021.
Stealing Market Share From Google
Investors are closely monitoring Amazon’s online advertising unit, which now holds a 7.5% share of the global digital advertising market, according to Insider Intelligence. Alphabet still leads as the digital advertising leader with a 28.4% share of the worldwide online ad market, while Meta accounts for 20.1%, as reported by the research firm.
During an earnings call, Amazon’s CEO Andy Jassy highlighted the company’s partnership with the National Football League as a growth opportunity. Amazon Prime Video has been streaming “Thursday Night Football” for the second season, and Jassy noted a 25% increase in ratings during the first six weeks compared to the previous year.
Jassy also noted that Amazon has significant untapped potential for integrating ads into video content and grocery stores.
“We’re also doing much better on the advertising side than we did in our first year, and that’s a property that’s really valuable,” Jassy said. “It’s the one game that week and advertisers want to be in front of customers because there’s 13 million customers a week watching.“
Amazon’s success in the digital advertising market has been partly attributed to the impact of Apple’s 2021 iOS privacy update, which negatively affected the online advertising businesses of social media companies like Meta, Snap, and Twitter (formerly known as X). Many advertisers redirected their budgets from Meta to Amazon due to perceived limitations in online ad targeting capabilities caused by the Apple update.