Dive Brief:
- Amazon reported that its "other" category, which includes advertising, jumped to $2 billion in Q1 2018, a 72% increase from the previous year with some adjustments, MediaPost reported.
- Advertising was a strong contributor to Amazon's profitability during Q1, an executive said during the company's earnings call, adding that advertising is now a multi-billion dollar program and makes up the majority of other revenue.
- For Q1, Amazon reported a 43% year-over-year increase in revenue, including sales from its recently acquired Whole Foods grocery chain. North American revenue increased 46%, totaling $30.7 billion.
Dive Insight:
While Amazon doesn't specifically break down its advertising revenue, the company's CFO Brian Olsavsky calling the ad business a multi-billion dollar program and the majority of its other revenue makes it clear that ad sales are growing quickly. For Q4 2017, Amazon reported a 60% year-over-year increase in other revenue for a total of $1.7 billion.
Though Amazon's ad business is still small compared to digital marketing's Facebook and Google duopoly, marketers are becoming more interested in investing their ad dollars with Amazon, likely attracted by the company's wealth of data on its customers' buying habits. Among brands already advertising on Amazon, 63% planned to increase their budgets on the platform over the next year, compared to 54% for Google and 53% for Facebook, according to a 2017 study by ClickZ Intelligence and GroupM's Catalyst.
Marketers are eager for alternatives to Facebook and Google, which command a significant majority of digital ad sales, if only to make pricing more competitive. Growing concern over issues like transparency and fake news has the potential to add urgency to the need for more choice in the digital media landscape, although so far Facebook continues to see gains in ad sales and Google's ad gains are also strong. Facebook's recent struggles with transparency and privacy following the Cambridge Analytica scandal could trigger more marketers to shift their ad budgets to Amazon.
Amazon has consistently built strong relationships with its customers, leading to greater brand loyalty and establishing it as a go-to source for product information and shopping. The company's increased revenue can also be attributed to its efforts to strengthen its ad platform. In December, Amazon said it would start selling video ads on the Amazon Advertising Platform for its owned properties that run video ads, including Twitch, IMDb, its homepage and Fire TV. The company also began offering premium product pages for advertisers that feature wide-screen videos and interactive multimedia displays that come with a $500,000 price tag.
