Amazon’s Advertising Services division is delivering the goods.
Last quarter, it generated $12.8 billion, a $2 billion increase over the previous year.
Meanwhile, Amazon’s net sales climbed by 10% in the second quarter, and profitability doubled from $6.7 billion to $13.5 billion, according to the company’s financial report, released on Thursday.
Making more than $12 billion in a single quarter sounds great. However, as you zoom out, the numbers become much more staggering. As CEO Andy Jassy boasted to investors, Amazon Advertising has now earned $50 billion in the past year.
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“Advertising remains an important contributor to profitability,” stated CFO Brian Olsavsky.
However, unlike prior quarters, when it appeared that practically all of Amazon’s profit margin was driven by ad growth, this time the profit growth is so dramatic that it must come from somewhere other than advertising.
To wit, another element contributed to Amazon’s income increase this year. If you search the earnings conference transcript for the word “ads,” you’ll find far more references to “workloads” – since everything these days is about generative AI technology.
No investor inquired about the advertising or media industry. In comparison, Amazon’s plan for global broadband delivery via satellite, Project Kuiper, has received continual attention due to its impact on the overall profit margin.
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But there’s a lot more juice to be extracted from the advertising sector. Jassy indicated that Amazon is dissatisfied with its $50 billion annual advertising revenue.
According to him, the majority of Amazon’s ad revenue is currently driven by plain sponsored product listings, which the business does not break down by channel or format. However, despite its size, it may soon cease to be Amazon’s top ad product.
“Even with this growth, it’s important to realize we’re at the very beginning of what’s possible in our video advertising,” Jassy told me.
The most “exciting opportunity” for businesses, he said, will be to directly connect business outcomes, such as a product sale or subscription signup, to traditional awareness-driven advertising, such as TV.
“We’re able to do that through our measurement and ad tech,” Jassy told me.
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