Dive Brief:
- Amazon's "other" category that largely consists of advertising sales grew to $7.9 billion in the second quarter, an 87% year-on-year increase, according to an earnings statement released Thursday.
- Net sales overall were up 27% YoY to $113.1 billion, a number that missed analyst estimates, making advertising a bright spot in the earnings report.
- The company said it introduced 40 new features and self-service capabilities to its Amazon Advertising portal over the period, and touted opportunities for brands on its streaming properties and platforms like Twitch. But Amazon is facing stiffer competition on both the e-commerce and content fronts, along with mounting regulatory scrutiny that could bring new headwinds in the second half of the year.
Dive Insight:
Amazon started to see some of the pandemic-driven e-commerce frenzy cool in Q2, but it continues to post impressive gains in advertising, a sector where it's a relative newcomer but increasingly positioned against heavyweights like Google and Facebook. Amazon's share of the U.S. digital advertising market last year surpassed 10% for the first time, according to estimates from eMarketer.
In its Q2 earnings statement, the company emphasized myriad new perks for brands, such as a regional sponsored product campaign creation feature, access to educational marketing resources through its Partner Network and simplified creative asset management tools. Amazon has previously been criticized for its fairly sparse marketing offerings, but it could be closing the gap as ad sales make up a larger portion of its overall business.
Making Amazon Advertising easier to navigate could be more important as rivals like Google and Facebook direct more investments toward their own commerce bets. Reporting Q2 earnings earlier this week, Google said retail was "by far" the largest contributor to growth in its Google Ads business.
With brand dollars continuing to flow in, Amazon has introduced more ways to reach consumers. It recently started piloting a service that lets merchants contact shoppers directly via email, a shift from the company's previously stringent hold over its customer data. The tool, called "Manage Your Customer Engagement," is geared toward marketers that want customers to make repeat purchases and foster more brand loyalty.
Content is another area in the spotlight as consumers continue to cut the cord and move to streaming. Amazon's ad-supported streaming platforms, which include IMDb TV, Twitch, live sports and network and broadcast apps available via Fire TV, now reach 120 million monthly active viewers, the company said as part of its first-ever NewFronts presentation in the spring. New partnerships could further shore up those assets.
Amazon earlier in July announced a multiyear licensing deal with Universal Filmed Entertainment Group that will make Prime Video the exclusive subscription video platform for the studio's live-action films in the U.S., including the upcoming "Jurassic World: Dominion," starting in 2022. IMDb TV also factors into the deal, though there are some caveats: the movies will receive a theatrical release and earlier run on NBCUniversal's own Peacock streamer. Still, it's another way for Amazon to round out its library amid a growing war for premium video content.
"With this deal, IMDb TV will be the first advertising-based streaming service to secure a major studio network window, which traditionally goes to broadcast or cable networks," Amazon said in its earnings statement.
Similarly, Amazon has notched some major wins with the desirable live sports category. Starting next year, Prime Video will be the exclusive broadcaster of "Thursday Night Football" in the most significant bet the NFL has made on streaming to date. The 11-year pact was originally supposed to go into effect for the 2023 season, but was bumped up in May.
