Amazon reveals ad services revenue as segment hits $9.7 billion
- Amazon’s advertising services generated $9.7 billion in revenue in the fourth quarter, a 32% year-over-year gain, according to a press release. This is the first time the company has detailed financial data specific to advertising sales, which was previously grouped into its “other” segment, where it made up the lion’s share.
- For the full year, Amazon recorded approximately $31.15 billion in ad revenue. Much of this activity is directed to sponsored ad placements, where brands pay to have their products appear in desirable places around Amazon’s e-commerce platform, including search results. But executives pointed to video advertising opportunities on Fire TV, IMDb TV and Twitch, which are starting to add more premium programming for advertisers.
- Longer term, the e-commerce giant is trying to round out its tech stack and usability with offerings like its demand-side platform, Amazon DSP. Building a robust and accessible advertising infrastructure will be important as traditional retail rivals step up their efforts to build similar networks.
Overview of the dive:
Amazon launching its advertising services for the first time is significant, and it’s easy to see why the company chose to do so now: the company is booming, putting a tidy bow on a solid period. Amazon saw total revenue hit $137.4 billion in the fourth quarter, which includes the critical holiday window. The profit reached 14.3 billion dollars.
Analysts have long speculated that Amazon will eventually convert the longstanding duopoly of Facebook and Google in digital advertising into a triopoly. This prediction is coming to fruition more firmly as brands seek out networks that can place their marketing messages closer to the point of sale.
Amazon’s “other” segment, which was primarily made up of advertising sales, has grown steadily in recent years to become one of the fastest growing areas of business, sometimes outpacing the main categories. Making ads an indie breakout looks mostly like a formality, but it does indicate where Amazon’s priorities could shift in 2022.
Its advertising services are still considerably smaller than those of Facebook and Google, which also reported profits this week. Google generated more than $61 billion in advertising revenue in the fourth quarter – just under double what Amazon saw for the full year – while Facebook brought in $36 billion. But the balance of the scales will likely continue to shift, especially if Amazon’s expansion continues on its current path.
Facebook is grappling with changes Apple made to mobile IDs last spring, making it harder to target and measure ads on its apps. A blow to campaign performance on Facebook, including its fledgling e-commerce products, has marketers looking for other platforms less affected by the Facebook maker’s app tracking transparency framework. iPhone, like Amazon.
At the same time, third-party cookies – another important means of ad targeting – are expected to be phased out over the next year. That means categories like CPG that have historically relied on the tactic for digital marketing purposes will be forced to advertise more on networks that hold lots of first-party buyer data, like Amazon does.
That said, Amazon isn’t the only company moving quickly on the retail media opportunity. Brick-and-mortar competitors with larger store footprints like Walmart and Target are adopting aggressive strategies in this area. Walmart, like Amazon, is trying to develop and scale its own DSP, a key piece of advertising technology. Google, too, is increasingly looking like a direct competitor.
Amazon has chips that traditional rivals don’t, in more mature e-commerce operations and a vast network of video offerings on Fire TV, the ad-supported streamer IMDb TV and Twitch, which remains dominant in the user-generated streaming space. Prime Video, which does not run traditional ads, has acquired more premium programs that may appeal to advertisers. Starting next season, NFL Thursday Night Football will stream exclusively on Prime as part of an 11-year pact, the professional football league’s most ambitious bet on the streaming space yet.
Amazon said it would increase the price of its Prime subscription from $119 to $139 per year, the first increase since 2018. One of the reasons for the change was the additional benefits available under the subscription plan.