Amazon’s advertising business demonstrates resilience to broader revenue challenges

Amazon cut its third-quarter results on Thursday, while the outlook for the fourth quarter and the critical vacation wasn’t particularly rosy. Despite apparent disruptions affecting the e-commerce giant’s core business, advertising – a relatively small but increasingly important category – has remained resilient in a broader market rally, largely driven by a return to media appetite digital. Perhaps most importantly, the third quarter marked the first time in Amazon’s history that service revenues exceeded retail sales, according to CNBC.

Total US digital ad revenue grew nearly 50% year-over-year to $81.5 billion in the first half of 2021, according to recent estimates shared by Magna, and is expected to remain strong through the end of 2021.’ year. This is not to say that the fourth quarter will not be volatile; Some retailers are withdrawing their spending plans as they face Amazon-like challenges, including clogged doors and shortages of materials that can leave shelves empty. But executives on a conference call to discuss third-quarter results weren’t particularly concerned about the advertising situation.

“We’re seeing strong growth,” said Brian Olsavsky, Amazon’s chief financial officer, when an analyst asked if there was a setback for the advertiser in response to the supply chain.

“There could be similar issues, but when it comes to the strength of the offer and the gap between the growth in advertising activity and the growing momentum, we think we appeal to advertisers,” added Olsavsky. “We’re offering new products, new ways to advertise, new ways to make your brands stand out. It attracts sellers for the same reasons.”

As part of its annual UnBoxed advertising event this week, Amazon has expanded its range of marketing tools and added eight new measurement and advertising products. This included adding image ads to Twitch’s live streams and a branding solution that tracked marketing campaign objectives such as recognition, purchase intent, and ad recall.

Even as the pandemic e-commerce frenzy has cooled, marketers are directing more of their budget to performance channels that are closer to driving action, such as a purchase. Amazon’s competitors such as Facebook and Google are also looking to shopping – and the opportunity to better connect ads to commerce – as their next long-term growth opportunity, which means Amazon will need to continue investing in solutions that can maintain your market leadership. . Traditional retailers such as Walmart, Target and Kroger are simultaneously increasing their interest in retail media, making the category even more urgent.

But in addition to its genuine commerce, Amazon has strengths in streaming media channels that have exploded in popularity as a result of COVID-19. Best known for providing game and e-sports content aimed at creators, Twitch now attracts an average of 30 million daily visitors. And IMDb TV, the ad-supported streamer, recently expanded to the UK in its first release outside the US.

Elsewhere, Amazon has secured the rights to the desired content packages, including exclusive rights to broadcast football on Thursday nights, starting in the 2022 season. The deal is the NFL’s biggest streaming bet to date.

“There’s a lot of excitement in the video ad space,” said Dave Fildes, director of investor relations at Amazon, at the analyst conference, although the ranking for this video isn’t the highest percentage of the company’s ad service.