‘Barely scraping the surface’: Amazon’s ads growth bolstered by sponsored products and new offerings

‘Barely scraping the surface’: Amazon’s ads growth bolstered by sponsored products and new offerings

A surge in Amazon’s advertising business has confirmed one of media’s most important trends right now: retail and commerce media are growing in importance for advertisers.

The company’s advertising revenues across sponsored ads, display, and video advertising grew 26% year-on-year to $12bn.

Meanwhile, Amazon’s total revenues increased 13% year-on-year to $143.1bn. Its high-margin Amazon Web Services division saw 12% revenue growth to $23.1bn.

‘Expect to see more convergence’

It’s also notable how large advertisers are trying to offer more value.

Agencies are intensely focused on providing new products for advertisers that address the burgeoning retail market, including with the likes of Amazon Ads.

At The Media Leader’s invite-only The Year Ahead conference in January, GroupM revealed how commerce was set to be one of the media’s fastest growing sectors in 2023.

Fast forward to this week, and the WPP media-buying division has released a new tool, the ‘Amazon Ads Excellence Monitor,’ to better help clients assess the quality of their ad executions across Amazon. Amazon has partnered with GroupM to develop the tool through the incorporation of additional data.

Samantha Bukowski, GroupM’s global head of commerce, told The Media Leader: “Commerce, retail, retail media, retail operations — it’s such a huge focus point for us right now.”

However, Amazon is more than a retail media behemoth and now offers ad inventory across Prime Video, Audible, and Amazon Music. Unfortunately Amazon does not split out its advertising revenue into different sub-sections, so it is not transparent what precisely is driving the bulk of the revenue growth.

Where’s the ad growth coming from?

In the company’s earnings call, Amazon CFO Brian Olsavsky commented that growth was “primarily driven by sponsored products as we lean into machine learning to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers.”

CEO Andy Jassy added a bit more context: “[M]ost advertising-heavy companies have struggled growth-wise as the economy has been difficult. And while we see companies being more cautious on the ad side and the top-of-funnel products, things like display and a little bit of video, we’re still seeing a lot of strength in the lower-funnel ad products like sponsored products.”

The company is further poised to improve its ad offering across its services. “I think that we have barely scraped the surface with respect to figuring out how to intelligently integrate advertising into video, into audio and into grocery,” said Jassy.

For one, Amazon is introducing ads into its Prime Video service by default. In a September statement, the company said that Prime Video shows and movies will include “limited advertisements” in the UK, which it specified as “meaningfully fewer ads than linear TV and other streaming providers.” An ad-free version will also be available at a thus far undisclosed price point.

Why ads on Amazon Prime Video are a game changer

The company has also recently launched a generative AI image generation tool that allows brands to upload a product photo and a description, and then allow the AI to develop “unique lifestyle images” featuring the product.

“You can expect to see more convergence in this space,” Bukowski told The Media Leader. “Thinking about Amazon Ads, they’re in CTV, they’re in social, they’re in audio. It’s not like retail media sits over here and its this little niche speciality and the rest of digital and performance marketing sits over there. We’re really living at the intersection of all those things.”

She adds: “We just want to make sure we don’t lose the depth of specialist knowledge that has to exist when working with platforms like Amazon, or anyone that has a retail component of their business.”

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