Amazon posts second $2B quarter for ad sales as explosive growth continues
- Amazon yesterday reported Q2 revenue of $2.2 billion in its "other category," which consists primarily of advertising, according to a press release. Amazon brought in $2 billion in ad sales in Q1, a first for the company at the time.
- Advertising sales grew 129% year-over-year, making it the fastest growing category for the e-commerce giant, Ad Age reported. Overall, Amazon's sales grew 39% for a total of $52.9 billion.
- "We have hundreds of thousands of emerging and established advertisers. And they're using our services to achieve their marketing goals ... whether that's to drive new brand awareness, discovery or ultimately purchase decisions on our site,” said Brian T. Olsavsky, chief financial officer at Amazon, in a conference call with analysts to discuss the results.
While it’s been clear for awhile that Amazon's ad sales are taking off, the latest quarterly results suggest sales are accelerating at an even faster pace than previously thought. Last fall, eMarketer forecast that Amazon would reach $3.19 billion in U.S. ad revenue by 2019. If ad sales continue at the current pace, Amazon could easily surpass $5 billion in ad sales this year. A portion of the ad sales revenue reported by Amazon in its quarterly earnings report are international, but the company made it clear in statements that international is a small — but also quickly growing — percentage of the total.
Amazon is attracting a wide range of advertisers, according to Olsavsky in the conference call. He pointed to strong adoption by Amazon vendors, sellers and authors, as well as third-party advertisers who want to reach the e-commerce giant's customers.
While Amazon is clearly a growing force in advertising, it still faces significant competition from tech giants Facebook and Google, which dominate digital advertising. For example, Facebook reported $13 billion in quarterly ad sales earlier this week. Areas where Amazon is focused on investing to better compete in advertising include improving the usability of its tools for advertisers, helping make smarter recommendations for customers and automating activities that advertisers need to do, per Olsavsky.
Measurement is another area of focus so that advertisers understand what outcomes they're driving.
"We think that we're uniquely positioned to show them the direct benefit of their advertising," Olsavsky said, a likely reference to the fact that, as an e-commerce platform, Amazon can easily connect ad views across its platforms (including Prime video, Echo devices and its sites) to transactions. For the most part, Google and Facebook aren't involved in direct selling, so offering that kind of insight is more challenging.
Amazon has taken a number of steps this year to improve its advertising offerings. For example, Amazon is reportedly starting to work more directly with brands instead of going through ad agencies to negotiate ad deals and has also been testing retargeting ads in a strike at Google.