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- Amazon’s small but growing advertising business increased 37% year-over-year to $3 billion in the second quarter.
- Amazon is gaining traction with advertisers, but the ad business’ growth rate was relatively flat with the first quarter, showing that it’s not growing as quickly as it was last year.
- The bulk of Amazon’s ad business comes from ads run on its own site and app but it’s recently made moves to build out its programmatic display and video arm.
- Amazon also increased its own marketing spend for its annual Prime Day sale more than usual, according to data from Kantar and MediaRadar.
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Marketers increasingly see Amazon as a threat to the duopoly of Facebook and Google, but Amazon’s growth rate has slowed in the past two quarters.
Amazon reported $3 billion in "other" revenue during the second quarter of 2019, which primarily includes advertising sales, a 37% year-over-year increase.
This is the second quarter in a row of tepid growth for Amazon’s ad business. Amazon made $2.7 billion in ad revenue in the first quarter, a 34% year-over-year increase. In the fourth quarter of 2018, Amazon made $3.4 billion, a 97% year-over-year increase.
According to eMarketer, Amazon’s ad business is expected to make $11.33 billion this year, up from $10 billion last year. To compare, Facebook reported $16.6 billion in ad revenue during the second quarter while Google’s parent company Alphabet reported $32.6 billion in the same time period.
Amazon’s ad business is comprised of ad formats including sponsored products and sponsored brands on Amazon’s website and a programmatic arm that places display ads on publishers’ sites and Amazon’s video properties. Amazon doesn’t break out revenue by ad format, but new research from Merkle suggests that most of its ad revenue is going towards a sponsored products format that displays an image of a product in search results or on product pages.
Merkle reported that 86% of clients’ spend on Amazon’s non-display inventory went towards sponsored brands in the second quarter, up 12% year-over-year.
There are signs that Amazon is working to build out its programmatic advertising arm. In May, the e-commerce giant agreed to acquire Sizmek’s ad server and Dynamic Creative Optimization tools to compete with Google in ad-tech. Amazon is also hiring for a "stealth advertising" engineering team that’s aimed at programmatic advertising for gaming.
Amazon is increasing its own marketing spend
Amazon also is spending more on its own advertising. It spent $8 billion on marketing in the first half of the year, up from $5.6 billion in the year-ago period.
A lot of that went into promoting its annual Prime Day, according to research from research firm Kantar and ads-tracking firm MediaRadar.
According to Kantar, Amazon spent $13.2 million on TV ads from July 1 to 16, incuding $8.1 million to promote Prime Day. The company spent another $5.9 billion on digital advertising that promoted Prime Day.
MediaRadar found that Amazon’s ad spending rose 28% year over year in the second quarter.
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See Also:
- NBCUniversal raked in nearly $1 billion in ad sales from digitally native brands during its 2019 Upfronts — showing how quickly these brands are turning to TV to scale
- Amazon wants to disrupt the $100 billion gaming industry, so it’s hiring for a ‘stealth advertising’ engineering team
- The CEO of a startup that helps marketers pull data out of walled gardens like Amazon explains why he just sold part of his business to Cannes Lions’ parent company
Source: Business Insider – ljohnson@businessinsider.com (Lauren Johnson)