Amazon’s ad business is booming, and there’s still room to grow


A reception desk at Amazon offices in downtown Seattle, Washington.

Glen Chapman | AFP | Getty Images

Amazon‘s advertising segment was just one factor in the company’s blowout fourth quarter, but the company outlined where it sees growth for the high-margin business.

Amazon’s “other” category, which is mostly made up of its advertising business, generated $4.8 billion in revenue during the quarter, a 41% increase from the year-ago period. During the earnings call, the company’s director of investor relations, Dave Fildes, said ad revenue as a subset had been growing at about the same rate year over year in the fourth quarter as it did in the third quarter.

Asked by analysts how the company’s ads business is working with brands, Fildes said the company is particularly excited about the Amazon’s “stores,” allowing a company to customize and curate a multipage digital storefront. Stores aren’t new, but the company has added features like shoppable images and the ability to schedule updates like new releases or seasonal changes.

“It allows them to better tell customers who they are [and] share their story,” Fildes said. He added this can help brands deepen customer engagement and loyalty with the tool.

Fildes also listed the ability of brands to create posts, which he said consumers can view to discover products and brands through a curated feed. The company launched “Posts” in beta last year. These kinds of tools are a way Amazon could move further up the marketing funnel and become more of a player in branding.

“I think broadly with advertising, so much of this is about … developing great relationships with these advertisers, because I think they appreciate the fidelity we can provide around shopping outcomes,” he said. “We’re uniquely positioned to do this given our retail business.”

Amazon shares took a major hit after third-quarter earnings fell short of expectations, but a bright spot was its advertising business, which appeared to be picking up speed after a few slower quarters.

In notes after Amazon’s fourth-quarter earnings report, Morgan Stanley analysts remarked that advertising “serves as a key area for both further growth potential and profitability flow-through,” and RBC analysts mentioned that advertising is one of the areas addressing the largest and least penetrated total addressable markets, also mentioning retail, cloud and business-to-business segments.

— CNBC’s Michael Bloom contributed to this story.

Leave a Reply

Your email address will not be published. Required fields are marked *