Google and Facebook should look over their shoulders.
Online advertising, which is one of Amazon’s fastest growing businesses right now, competes directly with them.
According to the company’s second quarter earnings, Amazon’s “other” sales category grew more than anything else.
That category includes Amazon’s advertising business, as well as other items like cobranded credit cards.
It saw more growth in the quarter than Amazon’s massive money-spinner AWS, and more than actual retail sales.
The “other” category grew 51% year on year to $US945 million (£723 million). Amazon’s advertising business is almost a unicorn by itself.
The only part of Amazon’s business which grew as quickly was “Retail subscription services,” or Prime, which also grew 51% to $US2.1 billion (£1.6 billion).
And it looks like Amazon wants to fuel the growth in its ads business.
The company’s chief financial officer, Brian Olsavsky, said the growth rate for Amazon’s ad sales team was faster than the 42% average across the business. The only other area where the company is hiring as quickly is AWS, Amazon’s cloud business which powers most of the web.
“We did see a big jump in head count in year-over-year. You’ll see it’s 42%, and in the past, I’d say most of that is driven by operations hiring. I’ve even said that headquarters or office hiring many times in the past was below the level of revenue growth. Right now, what we’re seeing is an accelerated growth rate in software engineers and also sales teams to support primarily AWS [Amazon Web Services] and advertising. So, yes, the growth rate of those two job categories actually exceeded the company growth rate. So we are adding — having success hiring a lot of people and pointing them at some very important programs and customer-facing efforts.”
Olsavsky also attributed Amazon’s larger-than-usual $US4.1 billion (£3.13 billion) marketing expenditure for the quarter on new hires.
He said advertising growth had been “strong and fairly consistent” over the last three quarters.
According to eMarketer, Amazon will generate $US1.81 billion (£1.38 billion) in online ad revenues.
Clearly that’s still a minnow compared to the digital advertising “duopoly” of Google and Facebook, which pretty much own online advertising between them. Google made $US22.7 billion (£17.4 billion) from advertising in the second quarter, while Facebook made $US9.2 billion (£7.2 billion).
And eMarketer predicted that Amazon will take less than 1% of the global ads market, while Google and Facebook account for almost half [OF] the market between them.
Still, one of the richest men in advertising is pretty worried about Amazon. Martin Sorrell, the chief executive of advertising holding company WPP, said on an earnings call in March that it wasn’t his newborn baby which kept him up at night.
“The answer to the question, ‘What worries you when you go to bed at night and wake up in the morning?’ isn’t a 3-month-old child,” he said. “It’s Amazon — which is a child but not three months.”
What is Amazon’s advertising business?
You probably haven’t noticed that there are ads on Amazon, but they are there.
Consider that Amazon is the biggest shopping site in the world and therefore one of the biggest media properties in the world. How can a retailer persuade you to buy their wares, given you’re browsing through an infinite supermarket?
Amazon offers a long list of advertising products to do just that. Here are just a few:
Amazon can show you everything from banner ads around its site to sponsored products to entire landing pages dedicated to a product or brand.
Here are some examples of sponsored products on Amazon:
And an example showing a small banner ad: