According to Amazon’s full year results for 2021, reported at the beginning of February, the online shopping juggernaut has a $30+ billion advertising business. Reports of the growing scale of Amazon’s advertising business have been common, but this is the first time the company has disclosed the amount of money it actually makes from selling ads.
Takeaways
- Amazon has been counted as a member of the triopoly dominating digital advertising for some time. Joining the original duo of Google and Meta, advertising spend on the shopping platform was thought to be increasingly significant. But until now, no one has been able to put a number on Amazon’s advertising business.
- The firm’s latest financial results disclose the real scale of Amazon’s advertising revenues for the very first time – $31.2 billion. At 7% of total revenues, this is smaller than other areas of the business; Amazon Web Services represents about 13% of overall revenue. But advertising income, perhaps surprisingly, is bigger than revenues from subscriptions, including Prime.
- Amazon reported its fourth-quarter advertising sales were up 32%. In the second quarter, the period that included Amazon’s Prime Day, advertising growth was 88%. Speaking to the Drum, Aaron Goldman of ad services company Mediaocean, said:
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.
Platform comparisons
Amazon is still very much the junior party in the trio of companies that are expected to account for over 50% of the world’s advertising spend in 2022. The group – Google, Meta, and Amazon – claimed more than $7 in every $10 spent on global digital advertising last year.
Google holding company Alphabet takes the lion’s share of digital advertising spend with $218 billion; Meta accounts for $115 billion; and Amazon follows with $31 billion. However, Amazon’s ad growth in 2021 is estimated at 63%, compared with 42% for Alphabet and 37% for Meta.
Although playing catch up with Google and Meta, Amazon’s advertising revenues are significantly larger than other platform rivals. Microsoft reported its 2021 advertising revenue at $10 billion; Snap’s total revenue came to $4.12 billion in 2021, and Pinterest’s was $2.58 billion.
Future growth
The inclusion of specific advertising revenue figures came as a surprise to analysts. The Drum speculates the announcement may have been motivated by the upcoming removal of third-party cookies from the digital advertising landscape. It said the removal of third-party tracking will make Amazon’s data on user journeys ‘extremely valuable’.
Goldman at Mediaocean said that the change will ‘anchor’ the company’s position as the point of purchase for a wide array of products, giving the business the opportunity to capture 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.
Amazon noted that a large proportion of overall ad spend is tied to its e-commerce operations. It is focusing on creating ‘great customer experiences’ that will build better outcomes for brands, with plans to develop its advertising offering and infrastructure including innovation in sponsored ads, streaming video and performance measurement.
