Amazon says advertising is becoming a “key contributor” to its business as the offer becomes “more valuable” to both customers and brands.
In its fourth quarter results, Amazon’s ‘other revenue’, which is mostly its ad business but also includes co-branded credit card agreements, was up 60% year on year to $1.7bn. That is a slight acceleration in growth compared to the previous quarter, when ‘other’ revenue was up 58%.
Speaking on a call with investors, Amazon CFO Brian Olsavsky said Amazon sees its ad business as a “key line in for brands and agencies into the ecommerce marketing space”, which he sees another form of digital advertising beyond search and social.
“Our strategy is to make the customer experience additive by the ad process. We want our customers to be able to see new brands and have an easier time discovering products that they’re looking for,” he explained.
“For brands, we think the value proposition is that we can find ways for them, especially emerging brands, to reach new customers. We’re working with advertisers of all types and sizes to help them reach our customer base and the goal of driving brand awareness, discovery and better purchase decisions by the customer.”
Much has been made of the role Amazon could play in the advertising space going forward. Citi analysts estimate that Amazon’s ad revenues could exceed $10bn this year, and rise to more than $50bn by 2028.
However, its current ad business is still dwarfed by both Google and Facebook. Google’s parent company Alphabet saw ad revenues rise to $27.3bn in the fourth quarter, while Facebook’s ad revenue came in at $12.8bn.
Amazon also said it is “very happy” with how its voice assistant Alex is performing, calling it a “very positive surprise for us”. Sales of devices such as the Echo hit a record high, although Amazon did not break out the actual figure, while there are now more than 30,000 skills for Alexa.
“[We had] very high levels of customer engagement, including increased levels of voice shopping, growth in functionality, growth in the partners we work with and skills have increased rapidly,” said Olsavsky. “It’s a very positive surprise for us.”