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Ads are now a billion-dollar business for Amazon


Ads are now a billion-dollar business for Amazon

Image: Amazon Marketplace

Yesterday, Amazon [1] disappointed Wall Street when it reported its fourth-quarter earnings for 2016.

The ecommerce behemoth reported $43.74 billion, which was lower than analyst estimates, and guided for revenue in Q1 2017 that was lower than analysts had expected.

But buried within Amazon’s earnings report was data suggesting that Amazon’s efforts to become a larger player in the digital advertising world are gaining steam.

As pointed out [2] by Business Insider, Amazon’s “other” revenue category in North America, which is believed to consist primarily of ad revenue, hit $1.3 billion annually. What’s more, it is the fastest growing category for the retail giant, growing 60% year-over-year.

While a billion-plus in ad revenue pales in comparison to the more than $80 billion in ad revenue Google pulls in annually, and is a fraction of the nearly $27 billion in ad revenue Facebook generated last year, it puts Amazon solidly in the top 10 digital ad players in the United States.

If it can maintain its current pace of growth, it could catch up to Verizon, which owns AOL, and Twitter, in the near future. And with more than a billion dollars in North American ad revenue, Amazon has double the ad revenue of Snapchat, which generated slightly more than $400 million in ad sales last year and just filed to go public [3] in an $3 billion IPO that will value the company at $25 billion.

How far can Amazon go?

Amazon’s ad business has attracted more attention in the past year, but it’s still a footnote at best in most discussions of the company.

Even so, Amazon has an increasingly robust suite of ad offerings, including Product Display Ads, Headline Ads and Sponsored Product Ads. All give Amazon sellers the opportunity to drive traffic to their product or brand pages on the Amazon site.

In December, Amazon Publisher Services launched [4] Transparent Ad Marketplace, a cloud based header bidding solution, and Shopping Insights Service, an analytics solution that lets publishers better understand their audiences using Amazon’s shopping data.

While nobody expects Amazon to build a Google or Facebook-like ad business any time soon – that’s probably not the company’s goal anyway – that treasure trove of shopping data does give Amazon’s ad business a lot of opportunity to grow much larger. After all, data that reveals what consumers have purchased and what they might be in the market to purchase is extremely valuable and probably nobody else has that data, or at least as much of it, besides Amazon.

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