Dive Brief:
- Amazon saw advertising sales grow 26% year-over-year for a total of $12 billion in the Q3 2023 period ended Sept. 30, per an earnings release. The company's overall net sales increased 13% to $143.1 billion, higher than analyst expectations.
- Executives attributed the ad growth to sponsored products, a lower-funnel ad product that remains strong amid a tough economic climate that has caused advertisers to be more cautious of top-of-funnel ad products.
- President and CEO Andy Jassy said Amazon has "barely scraped the surface" in its efforts to integrate advertising into video, audio and grocery as the segment remains a growth driver for the company.
Dive Insight:
Amazon continues to outpace its major competitors in the digital advertising world, with a 26% growth rate that is higher than it saw last quarter and higher than that of Google (11%) and a surging Meta (23%). CEO Jassy called out Amazon's particular abilities and offerings as what has helped it separate itself from the pack.
"We have fared pretty well in part because we have a number of owned and operated properties that have very large volumes that advertisers and brands want to get in front of. Even in a harder economy, there's going to be a lot of e-commerce purchasing. So people want to be in front of our customers in our marketplace," he said on the earnings call.
For example, "Thursday Night Football" on Prime Video is seeing ratings that are 25% higher than they were a year ago, helping Amazon do "much better on the advertising side," Jassy said, as brands seek to reach an engaged audience of about 13 million customers per week.
As previously announced, Prime Video will feature limited ads beginning in early 2024, a move that could help further accelerate Amazon's ad growth. Still, the company is hoping to have "meaningfully fewer ads" than linear TV and other streaming TV providers, which could help it maintain subscribers amid a crowded streaming landscape. However, the initial pricing of its new Prime Video ad tier has received pushback from media buyers, Ad Age reported this week.
Amazon continues to lean into machine learning to improve the relevancy of its sponsored product ads, which Jassy said is contributing to better ad performance for advertisers and could make its offering more attractive to advertisers who need large ad volumes but face budget challenges. As areas of future ad growth, Jassy said the company has "barely scraped the surface" of integrating advertising into video, audio and grocery. The executive also talked up its move to place sponsored products on third-party sites such as Pinterest, Hearst Newspapers and Buzzfeed.
In another move to attract advertisers, the company this week at its annual UnBoxed conference unveiled a range of advertising products, including a new data clean room tailored to publishers and a generative artificial intelligence (AI) solution for enhancing campaign assets.
