What’s Happening With Amazon’s Advertising Business?
Written by: Stephanie Bariatti, SMB Media Marketing Consultant
Just when it seems like Amazon can’t get any bigger, the e-commerce giant finds a way to become even more profitable. Love it or hate it, there’s no denying Amazon’s power player status.
In Q2, Amazon saw its revenue rise 20% year over year, to $63.4 billion. Most of this growth is due to the rollout of one-day shipping and subscription services. However, Amazon’s advertising business, though it only accounts for 5% of the company’s total revenue, is their fastest growing segment. Amazon management recently said that this segment saw revenue rise 37% year over year in Q2, to $3 billion.
So what is driving this impressive increase? For one thing, Amazon has been expanding their ad-supported content. Last year they launched IMDb Freedive, featuring popular films and TV shows. They then re-branded in June as IMDb TV, tripling their content library. The streaming service is available exclusively on IMDB.com, Amazon Fire TV devices and as a channel on Amazon Prime Video. Marc Whitten, VP of Fire TV reported very positive results, stating in a press release that "usage of free, ad-supported apps has increased by over 300% in the last year." If Amazon can manage to increase engagement in IMDb TV, this would naturally attract higher quality video ad inventory. This, in turn, would attract more advertisers and increased ad spend.
Amazon sees big opportunity to sell ads in the connected TV market. The ultimate goal here is for the company to establish itself as a dominant source for high-quality video ads and hopefully be able to break into the $70 billion traditional television ad market. Amazon’s service currently runs about that a typical TV network broadcasts, but big brands like AT&T, Proctor & Gamble, Verizon and PepsiCo have already run 15- and 30-second spots within the platform’s movies and shows.
In addition, earlier in the summer Amazon announced that it was partnering with both The Trade Desk and Dataxu to sell ad inventory on third-party TV providers’ content through the Amazon Fire TV device. If you’re not familiar, The Trade Desk is an online advertising marketplace that gives advertisers an accurate price and description of who they will be reaching with their ads. Dataxu, meanwhile, is a private software company that analyzes data to help marketing professionals improve advertising. Partnering with these two companies will allow for a greater number of sales of CTV advertisements. Amazon will still sell inventory through its own Publisher Services, casting their net even wider.
It seems as though Amazon is poised for some serious long-term growth through their ad business. With their plans to continue to build out IMDb TV library even more, while keeping it exclusive to their devices, they could potentially see a lot more customers happily remaining in their ecosystem. Amazon knows competition among streaming services is stiff these days and their Prime service may be cost-prohibitive for some.
Also, Amazon has a huge advantage over other services. Think of all the shopper data they have at their disposal. Advertisers can buy IMDb TV’s inventory through Amazon’s DSP, target their ads based on the company’s shopper data and then use Nielsen’s Digital Ad Ratings to have an independent measurement of their campaigns.
As time progresses, it should be interesting to see what other tricks Amazon has up its sleeve. eMarketer predicts that we will see Amazon ad revenues reach nearly $20 billion by 2021. And most experts agree that the mega company will continue to dominate in the coming years.
Stephanie Bariatti works as a Consultant and Project Manager for SMB Media Consulting. She has had extensive experience with many facets of advertising and media, having worked for and with creative agencies, production companies and research departments. She lives in New York with her wonderful husband, two lovable little boys, a new baby on the way and two snuggly Golden Retrievers.