Amazon (AMZN) ads can take over your life.
Already worth billions, Amazon’s nascent advertising business will be its next big venture. And for the most part, it’s flying under investors’ radars.
At its current pace, the ad business could stand toe-to-toe with Amazon’s cloud business, Insider Intelligence analyst Andrew Lipsman told Yahoo Finance.
“There is no doubt that this advertising business is an incredible profit generator,” Lipsman said. “The margins are unique and can be as important as AWS.”
‘Clicks are dead’
Investors would be forgiven for missing Amazon’s $10.6 billion in ad revenue in the second quarter.
The company did not start cutting the advertising until Q4 2021, when the company announced that the previously unseen part had been made. 31 billion dollars per year. According to Amazon’s latest earnings report, its ad business grew 22 percent year over year. As submissions.
Data is at the center of it all, says Swiftly’s chief revenue officer, Andy Friedland, formerly an Amazon advertising executive. For e-commerce, better data leads to sales for Amazon and other advertisers.
“Hands down, data is the core strength of North Star and Amazon’s ad business,” Friedland told Yahoo Finance. “They took the time to invest in robust closed-loop-reporting technology and it paid off big time.”
Over the next few years, Amazon’s ad business could dominate the company’s earnings reports (or subtitle), because Amazon is uniquely positioned to solve a long-standing problem in e-commerce: getting consumers to move from browsing to buying.
Now, Amazon’s advertising efforts focus on advertising at or near the point of purchase, called retail media.
“I think it’s advertising [for Amazon] According to Brian Mandelbaum, CEO and founder of business intelligence company Atain, “Advertising is part of the targeted marketplace. Marketers don’t care about clicks. … Amazon planted a flag on the ground and said ‘clicks are dead – it’s all about sales.’
All Amazon businesses feed on advertising.
Amazon is a master of both expansion and consolidation, what journalist and author Brad Stone calls “self-reinforcing businesses.” Although the tech giant is seen as a retail and cloud business today, it could be headed to a place where its other businesses feed on advertising.
“Amazon has it all,” said Ikjin Ahn, CEO and founder of machine learning and advertising company Molco. “Amazon has the data. Amazon has the conversion. … Amazon is the leader in performance-based advertising, which is very fast-growing and machine learning. There’s a secret sauce in Amazon advertising.”
For Amazon, it all boils down to this: How can I use third-party customer data to put ads in front of people most likely to convert? Then, how can I do that repeatedly?
As Amazon expands its footprint in grocery stores and brick-and-mortar locations, it’s building on word of mouth through advertising and information.
“In-store advertising is a huge opportunity,” Lipsman said. “There are a lot of measurement challenges around the effectiveness of in-store advertising, but because of the way Amazon’s stores are designed, they have the data integrity to understand that the same consumer who sees them on the web is walking into these stores.”
That extends to the media properties Amazon has been building, Lipsman said. “Alexa was the first of those, then came Amazon Studios, Twitch, the NFL,” he added. “These are all advertising vehicles.”
And this is just the beginning. “Amazon has all these cloud capabilities, and there’s an AWS connection that enhances advertising capabilities,” Lipsman added.
Generally speaking, Amazon’s advertising business may be bigger than retail. Already, advertisers are beginning to change how they perceive the tech giant.
“Marketers think of Amazon no longer as a retailer,” Mandelbaum said. “They’re a marketing machine … it’s almost a loss leader in driving retail conversions.”
How big can the business be? According to Friedland, “it’s easily $100 billion.”
“You’ll see their ad revenue stay around 10% as they keep pace with their retail growth,” Friedland added. “That alone is a huge driver for the continued success of the business.”
Ali Garfinkle is a senior tech reporter at Yahoo Finance. Follow her on Twitter @agarfinks.
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