Diving brief:
- Amazon’s revenue from advertising increased 19% year over year to $14.33 billion in the third quarter. according to a results report. The results are in line with analysts’ expectations but mark a deceleration in the growth rate compared to last year.
- This year, the e-commerce giant has focused on expanding its full-stack marketing capabilities, introducing ads on Prime Video in January. The streaming service is in the middle of its first “streaming season” after its upstream, or period of prior negotiations with advertisersin spring.
- Like other digital advertising platforms, Amazon has recently released a number of tools for advertisers, powered by generative artificial intelligence (AI). AI development comes with high costs, but could accommodate more advertising business and attract more advertisers to Amazon.
Dive overview:
Amazon’s ad sales segment remains a force to be reckoned with, even if it’s not quite growing at the same rate as before (26% YoY growth in Q3 2023 versus 19% YoY growth in the most recent fiscal year). Company’s advertising earnings match Wall Street estimates following a rare failure in the second trimester.
Retail media advertising, including sponsored product listings that appear on Amazon’s vast e-commerce marketplace, continues to be a growth driver thanks to a large pool of advertisers. Amazon is working to improve ad relevance and introduce additional optimization controls in this area, CEO Andy Jassy said in a call to discuss third-quarter results with analysts.
Amazon’s third-quarter earnings report broadly impressed investors on earnings and revenue, despite capital spending jumped 81% year-on-year to $22.6 billion, an increase driven by investments in generative AI.
Advertisers have been given more bells and whistles due to the AI spending spree. Amazon launched a tool in September that quickly converts product images into video ads using generative AI. Video is an expensive and time-consuming ad format to produce by hand, and the offering could gain traction with small and mid-sized marketers who don’t have deep pockets but rely on Amazon to handle transactions .
Amazon’s video generator follows an image generator released last year, capable of creating a high volume of campaign assets with a single click. At its annual UnBoxed conference last month, the company also unveiled an AI-powered solution to generate audio ads This represents no additional cost to U.S. advertisers using Amazon’s demand-side platform.
Amazon has consolidated its AI advertising products under a creative studio that facilitates marketing efforts on platforms such as Amazon.com, Prime Video and Twitch.
“(We) continue to support brands of all sizes with our AI-powered generative creative tools for display, video, and audio, including our video builder that uses a single product image to curate personalized AI-generated videos,” Jassy said. during yesterday’s call with investors. “Even though we generate a lot of advertising revenue today, there remains considerable growth potential.”
Other digital advertising platforms are touting their AI offerings for advertisers. Announcing its third-quarter results earlier this week, Meta highlighted the growing rise of AI generative image and text generators. More than a million advertisers have used these offers to create over 15 million ads Last month, CEO Mark Zuckerberg said, echoing Jassy’s comments, that there were “more benefits” to come.
Amazon also continued to tout advancements in advertising on Prime Video, a streaming service that hosts desirable live programming like the NFL’s “Thursday Night Football” as well as movies and TV shows. originals. Amazon earlier this year made its first pitches to the advertising community for deals for upcoming video content. The company exceeded its goal of securing $1.8 billion in anticipated commitments from advertisers, according to the media.
