Amazon Web Services (AWS) is one of Amazon’s main sources of profit, but its ad business is growing even faster.
Key Details
- As Amazon’s ad business accelerates past AWS, it signals more changes in an already-tumultuous economic environment.
- Amazon’s ad product revenue increased by 21% in the first quarter compared to last year, reaching $9.5 billion.
- By comparison, AWS’ revenue increased 16% in the same time period. Amazon’s online sales grew 3%.
- AWS and online sales still outpace ad revenue. AWS brought in $21.4 billion and online sales $51.1 billion, but the ad business is growing faster.
Why it’s news
Though Amazon’s ad business is not a primary income earner yet, its rapid growth indicates a shift in the economy and what consumers want. AWS is still the largest provider of cloud services, but its competitors are beginning to gain. Microsoft and Google have recently acquired a larger portion of the market share with their companies, Azure and Google Cloud.
While Amazon has lost some ground in the cloud-services sector, it is gaining in the digital-advertising field. It is expected to grow 12.4% this year and increase from 11.7% last year, Axios reports.
Amazon’s revenue from advertising seems small in comparison to its other divisions. In 2022, it made $502 billion. Around $38 billion of that came from its ad services. However, analyst Benedict Evans estimates that the ads have more than a 50% operating margin, potentially bringing in far more profit than even AWS.
The company still has plenty of markets to tap into with its ad services. In an earnings call, company CEO Andy Jassy said Amazon is still “very early” in its attempts to buy ad slots in sectors like video and live sports.
“Even in difficult economies, most people still shop, and with the largest e-commerce shopping venue, we have a lot of customers that companies seek to reach,” Jassy says.