Amazon's ad sales jump to $3.4B in Q4 2018
- Amazon reported a 95% year-over-year jump to $3.4 billion of Q4 revenue in its "other" category, which primarily includes ad sales, according to its earnings report. The e-commerce giant's ad business surpassed $10 billion last year.
- The e-commerce giant reported $72.4 billion in total revenue for the fourth quarter. The company’s earnings surged 63% to a record $3 billion during the key holiday quarter as revenue rose 20% to $72.4 billion from a year earlier.
- Amazon forecast revenue of $56 billion to $60 billion for the first three months of this year, less than the consensus estimate of $60.8 billion. If the company reaches the low end of that forecast, it will be its slowest sales growth since 2001. Amazon typically provides conservative sales estimates, The Wall Street Journal reported.
Amazon's booming ad business was a bright spot for the e-commerce giant, which warned that it plans to invest heavily in infrastructure like warehouses that support its sprawling distribution network. Amazon doesn't disclose exact numbers for its ad business, or how much comes from sources outside the United States, but the $3.4 billion from its "other" category revenue does appear to indicate healthy growth. The yearly number of $10 billion for ad sales is impressive but still trails Facebook, which posted $55 billion in yearly ad sales for 2018. The company is forecast to eat into Google and Facebook's share of the U.S. digital ad market by the end of next year, parlaying its product search features and trove of data about its customers, including their purchase histories, into more effective ad targeting.
Researcher eMarketer a year ago had forecast that Amazon’s U.S. ad sales would reach $2.8 billion in 2018, and in September raised its forecast to $4.6 billion — a number Amazon handily beat. EMarketer also forecast that Amazon's U.S. mobile ad revenue would surge 242% to $1.61 billion in 2018 from the prior year, giving the company a 2.1% share of the mobile ad market. Amazon in September made changes to its platform to simplify ad buying, grouping its ad sales under a new "Amazon Advertising" banner.
Amazon's revenue growth is slowing — the 20% gain for Q4 was the lowest since 2015 — even as the company pushes into new businesses. Amazon doesn't provide a breakdown of revenue from its mobile app or its Amazon Alexa virtual assistant. More than half (52%) of the products sold on its website are from other merchants who pay Amazon a 15% cut of sales and other fees, including advertising. Revenue from third-party seller services jumped 27% to $13.4 billion in Q4 from a year earlier.
Amazon also has expanded its brick-and-mortar footprint after the 2017 acquisition of Whole Foods Market, and the opening of bookstores and cashier-less Amazon Go stores that require customers to download a mobile app to gain entry and to make purchases. The company now has nine Amazon Go stores in Seattle, San Francisco and Chicago. Revenue from its brick-and-mortar stores, including Whole Foods, slipped 3% to $4.4 billion in Q4 from a year earlier, a decline that the company attributed to fewer calendar days. Whole Foods’ sales would have risen 6% when adjusted for those days, CFO Brian Olsavsky said in a conference call with analysts. The company also attributes Whole Foods’ delivery and pickup services to online sales.
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