Amazon’s margins on its new ad network are four or five times greater than the margin on its regular retail business, according to a long take on the company by Reuters’ Alistair Barr and Jennifer Saba. It might also be generating $500 million a year in revenue, the pair report.
Here are a few startling quotes from the article:
- “Online advertising has 20 to 30 per cent profit margins versus less than 5 per cent for Amazon’s retail business, according to Ben Schachter, an analyst at Macquarie.”
- “David Selinger, a former Amazon executive who runs e-commerce personalisation firm RichRelevance, recently predicted that Amazon’s ad business will hit $1 billion in sales this year.” (Amazon’s annual revenue is $75 billion.)
- Even the name of the ad network has been a mystery until recently: “This part of its business remained un-named until about the middle of last year, when the company formally christened it the Amazon Advertising Platform.”
- “Could it rival something like Yahoo, Facebook or AOL’s ad businesses?” said Macquarie’s Schachter. “Sure.”
- Here’s why Amazon has the advantage over Google and Facebook: “Google knows what people are searching for. Facebook knows what people like and who their friends are. Amazon knows you searched last week for running shoes, but also that you bought a pair a year ago. That kind of information has advertisers salivating.”
Read the full article here.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.
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