‘Considerable upside’: Amazon ad revenue tops growth among tech giants despite slowdown
Amazon’s advertising services grew revenue by 19% year on year to $14.33bn, the company announced in its Q3 earnings report.
It is the highest ad revenue growth figure of the major tech giants — narrowly higher than Meta (+18.7%) and outperforming Alphabet’s Google (+10.4%) and YouTube (+12.2%).
That is despite experiencing a slowdown in growth relative to last year. In Q3 2023, Amazon’s ad services grew revenue by 25% and reached a higher $14.65bn.
Amazon’s subscription services, which include Prime Video, also saw a slight slowdown in growth year on year, although it remained in the double digits. Revenue in this segment grew 11% year on year to $11.28bn (compared with 13% growth in the same period last year).
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Amazon’s overall revenue grew 11% to $158.88bn, meaning its ads business now makes up around 9% of its total turnover.
Its 19% growth pace was, however, tied with Amazon Web Services (AWS) as the company’s fastest-growing segment. By comparison, its online retail and brick-and-mortar retail divisions grew revenue by 8% and 5% respectively.
Both AWS and advertising are notably high-margin businesses. AWS reported an operating margin of 38.1%, up seven percentage points from a year earlier.
While Amazon does not report operating margin for its ads business, tech and media analyst Benedict Evans has previously suggested it is likely above 50%.
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This was highlighted on the company’s earnings call by chief financial officer Brian Olsavsky, who noted that advertising “remains an important contributor to profitability in the North America and international segments”.
CEO Andy Jassy outlined that the company intends to significantly increase capital expenditure next year as part of an investment drive in generative-AI development, which could weigh on margins particularly for AWS.
According to Jassy, AI development is core to expanding Amazon’s retail and advertising businesses. Amazon is working to support brands with its generative AI-powered creative tools, including a new video generator; meanwhile, AI tools have also been expanded for consumers.
Its “generative AI-powered expert shopping assistant” Rufus was released in the UK in September and last month Amazon also debuted AI Shopping Guides that aim to simplify consumer product research.
Other AI innovations announced last month at Amazon’s UnBoxed event included enhancements to its Performance+ platform, machine-learning recommendations for tweaking campaign performance and an AI audio generator.
‘Considerable upside’ in advertising
On the earnings call, Jassy told investors: “While we’re generating a lot of advertising revenue today, there remains considerable upside.”
He continued: “Our expansive reach, ability to service relevant offers to our customers, opportunity to engage customers from the top of the funnel to point of purchase, and leading capabilities around measuring outcomes at every touchpoint, provide all types of brands with full-funnel advertising at scale.”
Amazon is seeing “meaningful growth on a very large base” for its Sponsored ad product, Jassy added, and the company will work to further drive performance by improving ad relevancy and developing new optimisation control tools.
“Newer offerings”, such as ads on its Prime Video subscription service, are still “in their very early days”, he explained. Prime Video introduced ads as the default service for subscribers at the beginning of the year, with subscribers given the option to pay more for an ad-free experience.
Advertisers have signalled a high degree of responsiveness to the Prime Video ad offering. Adam Foley, CEO of Bountiful Cow, previously told The Media Leader that he believes Prime Video’s default ad tier is a “game-changer”. Seamus Brennan, director of partnerships at Kepler, has said it “could be the most important moment in commercial TV for years”, given Amazon could bring addressable data with advanced measurement from its retail business to the TV proposition.
In the UK, Prime Video’s average ad-supported monthly reach totals more than 19m users.
According to internal research shared at Amazon’s October upfronts, Prime Video viewers were found to spend 36% more on Amazon.co.uk compared with the average Amazon customer.
The company is also set to debut a number of ad formats in the UK during 2025, including shoppable video, pause and carousel options.