Amazon's nascent ad business is bigger than it's ever been — and it's starting to make inroads with big brands

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  • Amazon made $10 billion in advertising sales during 2018, with $3.4 billion earned during the fourth quarter of 2018, execs said during an earnings call.
  • Amazon is increasingly grabbing marketers' attention as an alternative to Facebook and Google, especially when it comes to branding-oriented campaigns.
  • Advertising was mentioned 25 times by execs and analysts during the earnings call, up from 12 mentions during third-quarter earnings.

Amazon's ad business may not be as gigantic as Facebook's or Google's, but it's gaining traction.

During Amazon's fourth-quarter earnings, the e-commerce giant reported $3.38 billion in "other revenue," a line item that mostly comprised advertising sales during the fourth quarter of 2018, up from $2.5 billion during the third-quarter. Year-over-year, "other" revenue jumped 97% from the $1.7 billion Amazon reported in the fourth quarter of 2017. For the year, Amazon's ad revenue hit $10 billion.

According to a recent note from Pivotal Research, Amazon is expected to make $38 billion in ad revenue by 2023.

Read more: Amazon's ad business is set to more than quadruple by 2023 — and Google should be worried

Advertising represents a small fraction of Amazon's revenue, but it's increasingly on the lips of executives. Advertising was mentioned 25 times by execs and analysts during the earnings call, up from 12 mentions during the third-quarter earnings call.

To compare, Facebook made $56 billion in ad revenue for 2018, and Wall Street expects Alphabet-owned Google to report $136 billion in 2018 revenue when it reports its fourth-quarter earnings next week.

While Amazon's ad business grew 97% quarter-over-quarter, the growth rate is slower than past quarters. Advertising grew 123% quarter-over-quarter in the third quarter and 129% in the second quarter.

"We are comping a period of rapid growth — we're continuing to see quite strong adoption," said Brian Olsavsky, Amazon's chief financial officer, when asked by an investor about the decline.

Amazon reported a total of $72.4 billion in fourth-quarter revenue. For the total 2018 year, Amazon raked in $232.9 billion, marking the first time the e-commerce company passed $200 billion.

Investors also asked about the company's priorities for advertising, and Olsavsky said Amazon is "working on improving the usability of tools."

Amazon has its sights on big-brand budgets

Performance-driven retailers and brands traditionally represent the bulk of Amazon's advertisers, but that's starting to change as Amazon moves into measurement and video advertising.

The company recently rolled out a metric called "new-to-brand" to all advertisers, which tracks the number of people who saw an ad for a brand and then purchased that brand on Amazon for the first time in a year. Amazon tested the metric with ads that run during its live streams of NFL telecasts.

Amazon has held exclusive digital rights to streaming of some NFL games for two years, and Amazon is interested in expanding into video advertising on additional live sports, execs said on the earnings call.

Amazon also recently became accredited by the industry watchdog Media Rating Council to measure viewability, a metric that big brands use to measure how many of ads are actually viewed by humans.

Video is another growing area, according to marketers. Amazon is pushing into ad-supported over-the-top media services with Fire TV and IMDB's streaming service Freedive.

"Facebook and Google have had video inventory at scale that's ad-supported for some time now," John Nitti, Verizon's chief media officer, told Business Insider recently. Verizon tested ads on Freedive. "While Amazon's ad business had been relegated to display and other ad formats, now they're starting to scale into video."

SEE ALSO: Amazon's 'complex' ad business may still confuse marketers, but it will push into video and display next year to grab ad dollars from Facebook and Google

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Contributer : Tech Insider https://read.bi/2So8Wmg
Amazon's nascent ad business is bigger than it's ever been — and it's starting to make inroads with big brands Amazon's nascent ad business is bigger than it's ever been — and it's starting to make inroads with big brands Reviewed by mimisabreena on Friday, February 01, 2019 Rating: 5

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