Amazon’s advertising business is surging amid industry-wide ad sales boom for tech giants

(GeekWire Photo)

Amazon’s advertising business continue to grow rapidly as it is now one of the company’s key sources of revenue.

In the company’s second quarter earnings report, Amazon said its “Other” category generated $7.9 billion in sales, up a whopping 87% from the year-ago quarter, and up 14% from the first quarter of 2021.

Amazon does not break out specific financials for advertising, but its “Other” category “primarily includes sales of advertising services, as well as sales related to our other service offerings,” according to earnings report statements.

The 87% growth rate is notable; that rate in the year-ago quarter was 41%. Other Amazon businesses are not growing as quickly — sales from the online stores category grew 16% in Q2 2021, for example, and Amazon Web Services sales grew 37%.

The “Other” category is now a nearly $32 billion annual business, based on the Q2 2021 metrics. Perhaps more importantly, advertising is a high-margin business, helping boost Amazon’s profits that grew to $7.8 billion last quarter.

For comparison, Amazon’s subscription services category, which includes revenue from Prime memberships, also reported $7.9 billion in revenue. That was up 28% year-over-year.

Amazon’s advertising arm is eight times as large as Snapchat’s entire business, and nearly seven times as large as Twitter.

And even still, Amazon only has a 10% share of the U.S. digital ad market, according to eMarketer, though its share has been growing in recent years.

Facebook and Google — which combined have more than 50% market share of the digital ad market — are also seeing huge revenue spikes for their respective ad businesses, as are other tech giants. Microsoft-owned LinkedIn said this week that its quarterly advertising revenue surpassed $1 billion for the first time in the recent quarter, up 97%.

Axios reported Thursday that pandemic-driven trends such as the acceleration of digital adoption and a Q2 2020 ad market slowdown contributed to the recent ad sales growth.

Amazon CFO Brian Olsavsky noted that some of the year-over-year growth in advertising was due to the slowdown a year ago. “But the majority of it is all the new products and functionality that we’ve been able to roll out for customers and just more demand for advertising and higher bid rates and click through,” he said on Thursday.

Amazon generates ad revenue from an array of places, but a majority comes from charging companies to promote their products on Amazon’s online marketplace. As Amazon’s online shopping business has surged during the pandemic, so too has the advertising machine.

Olsavsky added that the advertising business is part of the company’s “flywheel,” noting that Amazon wants to help customers find products they wouldn’t have seen otherwise.

Amazon also makes ad money from its streaming media platforms such as Twitch or Fire TV.

Its IMDb TV streaming service, which is supported by ads, just inked a licensing deal with Universal Filmed Entertainment Group. And Amazon recently landed a 10-year deal to stream NFL Thursday Night Football on Prime Video.

Amazon said its advertising team launched more than 40 new features and self-service capabilities last quarter, and expanded ad-related offerings in Australia, Europe, India, Japan, and Saudi Arabia.

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