Andy Jassy, chief executive officer of Amazon.Com Inc., during the GeekWire Summit in Seattle, Washington, US, on Tuesday, October 5, 2021.
David Ryder | Bloomberg | beautiful pictures
While the majority of their business comes from e-commerce and cloud computing, Amazon has built Powerful online advertising department by asking brands to pay a lot of money to advertise their products on company websites and apps.
inside second quarter, Amazon grew faster than one of the larger players in the market and beat the rest of the big players as well. Amazon’s ad revenue jumped 18% from a year earlier to $8.76 billion, topping analyst expectations and underscoring the unit’s rapid growth and growing importance to the company. with brands.
Below are the growth rates in descending order for the top online advertising platforms.
- Amazon – 18%
- Snapshot – 13%
- Google – 12%
- Pinterest – 9%
- Twitter – 2%
- Facebook – (1.5%)
It’s not just social media companies that call for a challenging advertising environment. Streaming service Roku disappointing second quarter report result and said in a shareholder letter that the current advertising market is reminiscent of the beginnings of Covid-19 pandemic“as marketers prepare for macro uncertainties by rapidly reducing ad spend across all platforms.”
Meanwhile, Amazon provided some reassurance for Wall Street, issuing guidance for third-quarter revenue growth of 13% to 17%. That would be a boon for the advertising division, said Andrew Lipsman, an analyst at Insider Intelligence, because “the advertising business is like the commercial business.”
“In the long run, I think Amazon is building an absolute ad agency,” Lipsman said. “That engine will become converted into advertising.”
Amazon has a distinct advantage over some social media platforms that have struggled in the past. In 2021, Apple iOS privacy changes make it harder for ad-supported websites to track users, a move that could too big impact on Facebook and Snap. In contrast, Amazon is a separate silo where advertisers go directly to build campaigns.
Lipsman said that companies concerned about a potential recession are allocating more of their advertising budgets to places like Amazon, where they are more likely to get a return on investment.
“It’s a flight to safety for advertising dollars right now, and that safety is when you can show a measurable return on ad spend,” Lipsman said.
Prospects for ads leading to direct sales are leading the way Pinterest’s current strategy. The company is investing heavily in e-commerce and recently named former Google commerce lead Bill Ready as its new CEO, succeeding co-founder Ben Silbermann.
Justin Patterson, an analyst at KeyBanc Capital Markets, said there are signs that Pinterest is seeing some success in e-commerce and that “algorithms help people discover contact or discovery Pinterest items for shopping also continue to improve.”
Pinterest’s revenue fell slightly short of analyst estimates, and the company also gave a disappointing forecast for moderate growth. But stocks up 12% after activist investor Elliott Management revealed it was the largest shareholder in the company and said, “Pinterest occupies a unique place in the advertising and shopping ecosystem.”
Despite all the gloom and gloom about the broader online advertising market, Kate Scott-Dawkins, global director of business intelligence at media investment firm GroupM, sees plenty of reasons. to be optimistic. Facebook’s parent meta is still bringing in a lot of cash, and while the social media platforms aren’t experiencing the explosive growth they did during the pandemic, they’re still getting advertisers’ attention. top, she said.
Scott-Dawkins says brand awareness is important for companies in the consumer packaged goods industry and elsewhere, regardless of the current economic environment.
“We have heard from CPG brands in the past about how important they are to advertising and brand promotion during an economic downturn, in terms of continuing to ensure that consumers choose their brands,” she said. their brand instead of a regular brand,” she said.
The big question will be whether consumers will cut back on spending as this year rolls around, which could have a deeper impact on a company’s advertising budget. If that’s the case, Amazon could still regain market share, but in a market with fewer dollars.