What you need to know

• Amazon's advertising global revenues for 2023 were just shy of US$47bn, including over $14bn for the most recent quarter.
• CEO Andy Jassy and CFO Brian Olsavsky have tended to avoid commentary on the ad business in earnings calls in the past. This time both sang its praises.
• Investment analysts have also taken note, especially of the relatively undeveloped opportunity given the scale of the Prime business, and what they consider to be relatively low ad loads.
• Meanwhile the Australian business has been flagged as beginning to genuinely pose an existential threat for retail ecom pure-players.
• Accenture Song MD and ecom chief Peter Davias expects its business to "double in size" by 2025.

Amazon's advertising business is on the cusp of cracking a $50 billion advertising annual run rate, a benchmark it should achieve by mid 2024, and this year, in its most recent earnings call with investment analysts, the company's leader actually highlighted the performance, something they have avoided in the past.

According to Andy Jassy, Amazon CEO. "Our advertising growth remains strong, up 26 per cent year-over-year, which is primarily driven by our sponsored ads."

He also called out the early foray into television, which for the time being remains a US initiative "We've recently added Sponsored TV to this offering in the U.S. a self-service solution for brands to create streaming TV campaigns with no minimum spend, putting this advertising within reach of any business. While still early days, streaming TV advertising continues to grow quickly."

He noted that brands are using Amazon's capabilities to reach engaged viewers in across a range of channels, "On Twitch, Freevee, Fire TV and Prime Video shows and movies, which just launched in the U.S., as well as Thursday Night Football."

CFO Brian Olsavsky said "The strength in advertising was primarily driven by sponsored products as our teams worked hard to increase the relevancy of the ads we show customers by leveraging machine learning."

He alluded to Amazon's significant capability to match intent via its shopper data trove.

"Advertising only works if the ads are helpful to customers and there's a lot of value in tailoring sponsored products, so they are relevant to what a customer is actually searching for. We're also continually focused on improving our measurement capabilities, which allow brands to see the payback of their advertising spend."

Investment analysts on the call flagged what they called a substantial opportunity for Amazon for further ad growth given what they described as a massive number of Prime users coming in on reasonable CPMs, and with, for now, a low ad load.

Olsavsky noted that Amazon's ad revenue growth exceeds its traffic growth – meaning it is growing yield – and said the ad business will continue to enter other video markets. "We are looking for ways to increase our advertising in our streaming properties, including Fire TV, but also -- and Prime Video, but also things like Freevee and Twitch."

He said, "It's an important part of the total business model, and we expect it will allow us to have a healthy business to continue to invest in content and to continue to grow that. And we feel good about it, and the way we anticipate the ads progressing, we will not have heavy ad loads relative to the other network TV and other things. And like all of our advertising, we're trying to be useful for customers."

Australian figures due soon

Last year Amazon in Australia generated $100m in ad revenues while its online stores generated $1.3bn. Experts predict the Australian operations to rapidly ramp up this year and next across both ecom and advertising, increasing pressure on pure-play online retailers.

Speaking on an Mi3 podcast, Accenture Song's Managing Director and ANZ Commerce Lead Peter Davias said, "I think Amazon is going to make forever ongoing large investments in this market."

According to Davias, "I feel that their business will likely double in size over the next couple of years, which is going to then start to really have an impact [on] retailers, probably knocking off the pure players, but then going into particular categories and really starting to carve [them] out. I think we're going to see a lot of change happening across the sector over the next couple of years there."

Having cracked the century in 2022, Amazon's advertising result this year is expected to be significantly higher as retail media channels begin to attract a greater share of marketing budgets. After launching in the US and UK, the local launch of ads on Prime is anticipated by mid-year.