Amazon posted what it described as “robust” growth, partly driven by better measurement and AI-driven ad relevance, in its advertising services for the September quarter.
Advertising revenue grew 26% to $US12.06 billion in the three months compared to the same quarter last year.
Amazon is leading in terms of growth in the latest round of digital platform profits results, indicating a global rebound in advertising sales, according to analysts.
Google reported September quarter advertising revenue up 9% to $59.65 billion. YouTube ad sales were 12% higher at $7.95 billion.
Meta, the parent of Facebook, Instagram and Threads, reported a stronger than expected September quarter with advertising revenue at $US33.64 billion, 23% higher than the same three months last year.
Amazon is now the third largest advertising platform, after Google and Meta.
“We had a strong third quarter as our cost to serve and speed of delivery in our stores business took another step forward, our AWS growth continued to stabilise, our advertising revenue grew robustly, and overall operating income and free cash flow rose significantly,” says Amazon CEO Andy Jassy.
Amazon has been leaning into machine learning to improve the relevancy of ads shows and has been enhancing measurement capabilities.
Jassy says there’s a lot to be excited about advertising.
“If you look around the industry, most advertising-heavy companies have struggled growth-wise as the economy has been difficult,” he said when briefing market analysts.
“And while we see companies being more cautious on the ad side and the top-of-funnel products, things like display and a little bit of video, we're still seeing a lot of strength in the lower-funnel ad products like sponsored products.
“We have fared pretty well in part because we have a number of owned and operated properties that have very large volumes that advertisers and brands want to get in front of.
“Even in a harder economy, there's going to be a lot of e-commerce purchasing.
“Most of our resource in the advertising side is spent on machine learning expert practitioners who are honing algorithms to make sure that the sponsored results people get when they search on something are relevant.
“And because of that, those ads perform better for advertisers. So, when they have to think about budget decisions, they're going to choose the ones that have large volume and perform better. I think both of those are real advantages in our advertising area right now. In terms of additional things we're excited about.”
Prime Video shows and movies starting in 2024 will include limited advertisements. Subscribers in Australia will see advertising later in the year.
Amazon plans fewer ads than linear TV and other streaming platforms. An ad free version of Prime will also be available, for a fee.
“We have barely scraped the surface with respect to figuring out how to intelligently integrate advertising into video, into audio and into grocery,” says Jassy.
Amazon has also just released a generative AI image generator designed to help advertisers create more engaging ads.
An Amazon survey in March this year, which found that nearly 75% of advertisers who were unable to build successful campaigns, cited building creatives and choosing a format as their biggest challenges.
“In advertising, we just launched a generative AI image generation tool, where all brands need to do is upload a product photo and description to quickly create unique lifestyle images that will help customers discover products they love,” Jassy told analysts.
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