Amazon to focus on Digital Advertising as its More lucrative than AMS

After releasing their fourth-quarter and full-year earnings last Feb. 3, Amazon discovered that their North American sector was 18.4% higher in 2021 as compared to 2020. While this figure is still higher than the industry growth rate of 17.9%, the company’s individual growth has slowed down. Previously, Amazon never experienced a growth rate of less than 20% since reporting North American sales in 2014.

Amazon has recently revealed the revenue it collects from advertisers on its platform. This revenue had previously been categorized as “other”. Last year, the company collected about $31.6 billion in advertising revenue, making it the third-largest digital advertising platform in North America, behind Google and Facebook. In comparison, Amazon Web Services (AWS) generated $62.2 billion in revenue. AWS is known as the company’s most lucrative business, however, it is also the most capital-intensive offering and yielding only $18.5 billion in operating income.

Furthermore, retailers selling advertisements has become one of the fastest-growing trends in the entire industry. eMarketer estimates a market growth of about 55% in 2021, with Amazon holding a 77% share of the market. With the rapid shift towards e-commerce, retailers are eager to boost their sales with services such as advertising. Simultaneously, changes to privacy policies in Apple and Google have made digital advertising easier for these businesses.

Due to this, retail media networks will likely continue to grow exponentially over the next few years. Amazon’s challenge, therefore, is to continue the growth of its ad business without compromising its shoppers’ experience.

Source: Forbes