Sponsored ads currently drive the majority of advertising revenue for the giant online retailer Amazon.
“And we see further opportunity there,” CEO Andy Jassy told market analysts in a briefing.
“Even with this growth, it's important to realise we're at the very beginning of what's possible in our video advertising.”
Amazon’s advertising business grew 20% to $US12.77 billion in the June quarter
The business is still small compared to Amazon’s retailing but is growing fast, putting it third in the world behind Google and Meta for digital advertising.
“In May, we made our first appearance at the upfronts and were encouraged by the agency and advertiser feedback on the differentiated value we offer across our content, reach, signals and ad tech," said Jassy.
“With ads and prime video, the exciting opportunity for brands is the ability to directly connect advertising that's traditionally been focused on driving awareness, as is the case for TV, to a business outcome, like product sales or subscription signups.
“We're able to do that through our measurement and ad tech, so brands can continually improve the relevance and performance of their ads.
“While ads have become the norm in streaming video, we aim to have meaningfully fewer ads than linear TV and other streaming TV providers. And of course, for customers preferring an ad-free experience, we offer that option for an additional $2.99 a month.”
While 20% growth in the June quarter was strong, and better than the 10% lift in net sales to $148 billion, it was below expectations by market analysts.
“Amazon’s ad revenue continues growing, though not as much as expected,” said Forrester senior analyst Nikhil Lai.
“The company is focused on getting brands that don’t sell on Amazon to advertise with Amazon, which necessitates Amazon offering comparable features to ad platforms like Google’s, Meta’s and The Trade Desk’s.
“Amazon’s launch of Performance+, a new campaign type using Amazon’s signals and machine learning to automate campaign setup, audience creation, and optimisation, purports to offer advertisers more transparency and control than Google’s Performance Max and Meta’s Advantage+.
“From both endemic and non-endemic brands, Amazon is focused on getting upper funnel ad dollars by investing in planning, buying, and optimization tools for Prime Video ads, Twitch ads, ads on Fire TVs, and ads on Amazon packages, among other formats.”
Amazon’s first TV upfront was long on celebrity and short on details about how its shoppable formats will perform, said Lai at Forrester..
“Nonetheless, Amazon’s rights deal for the NBA, which the company struck in partnership with Disney and Comcast, will continue luring index-based media buyers, who are interested in associating their brand with prime time programming,” said Lai .
“Advertising – especially when it occurs on Amazon’s owned and operated properties – continues generating high-margin operating income for Amazon, helping the company offset losses from first-party product sales, third-party seller fees, brick-and-mortar sales, and subscription services.”
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