Amazon faces uncertainty heading into the holiday season as the macroeconomic picture remains gloomy and consumers tighten their spending. The mixed Q3 results and a dim outlook for the current period add to a brutal run of tech earnings that have seen other digital platforms like Meta and Google suffer. Amazon expects between $140 billion and $148 billion in net sales for Q4, well below Wall Street’s expectations.
While the duopoly largely relies on ad sales for growth, it’s a comparatively small segment for Amazon, which leans more on its e-commerce and cloud-based computing operations. Amazon only began breaking out advertising services as a standalone segment at the start of the year, but it’s proved dependably strong, reflecting a mass migration of ad dollars toward retail media and performance channels.
Amazon is now nearing $10 billion in quarterly revenue from ads, placing it well ahead of traditional retailers that have raced to stand up their own networks. Compared to digital rivals, the rate of growth for Amazon ads is far healthier, if not quite capturing the massive takes of Google and Meta.
Amazon’s scale, sophisticated ad technology and ability to run media placements around its sprawling e-commerce marketplace are clearly appealing to brands that are feeling the pinch of inflation and are under pressure to prove their campaigns lead to purchases. That might give Amazon a leg up in the holiday ads race, even if the season on the whole disappoints.
“We’re realistic that there’s various factors weighing on people’s wallets, and we’re not quite sure how strong holiday spending will be versus last year,” said Amazon Chief Financial Officer Brian Olsavsky on a call discussing the Q3 results with analysts. “But we know the consumers when they’re looking for good deals, and that positions us well. Advertisers are looking for effective advertising.”
While many retail media networks are focused on search offerings, Amazon is among a handful of mature players pushing into video. At its UnBoxed conference earlier this week, the firm revealed a slate of perks for marketers investing in the premium format, including the addition of self-service video campaigns to its Sponsored Display program. Amazon is also expanding a test of a feature called Video Builder that provides templates to help make video campaigns more robust. The idea is to attract a greater number of small and mid-sized marketers that might otherwise view video as too pricey or resource-intensive.
“We want to bring the power of video advertising to more brands, no matter their size or level of resources,” said Tanner Elton, vice president of U.S. sales for Amazon Ads, in a press statement around the show.
Amazon is also increasingly formidable on the programming front with the addition of NFL “Thursday Night Football” to Prime Video this season. The streaming bet has been costly to market to consumers but has already drawn the interest of a number of blue-chip brands, including some that don’t sell on Amazon like Mercedes-Benz. Courting non-endemic marketers could be another advantage for Amazon as retail media competition gets stiffer.
Read the full article here
