Rahul Sachitanand
Jul 29, 2022

Amazon promotes advertising offerings as business growth slows

AWS and advertising sales were the growth driver for the tech giant.

Amazon promotes advertising offerings as business growth slows

Amid faltering growth for its mainstay businesses, with revenue growth declining and a second consecutive net loss for the quarter, Amazon is leaning on its booming cloud services business, Amazon Web Services, and is building on its basket of advertising offerings with strong prospects. As a global recessions looms and existing supply chain concerns continue to bite, the tech giant reported a 7.2% growth in revenue to $121.2 billion, even as it slid to a net loss of $2 billion versus a profit of $7.8 billion in the corresponding period last fiscal. 

Despite the headwinds faced by competition such as Meta and Alphabet, Amazon's ad business continued to shine. This unit's revenue grew by 21% year-over-year, in the quarter. But this growth too was well down from the heady 88% this business experienced a year ago. "Right now, we still see strong advertising growth," Brian Olsavsky, CFO, Amazon, told analysts in a post-results call. "We're also... expanding our array of advertising products from our consumer websites to video opportunities, Twitch and others."

Dave Fildes, director of investor relations, provided more context around this expansion. He pointed out that the company has introduced interactive ads last year for streaming video content, things like Freevee, a streaming movie service and Amazon Music has as ad supported tier as well for audio ads. 

Amazon Freevee

Amazon is feeling the effects of having a business bloated by the pandemic, with too many employees and warehouses, weighing down its operations, especially in ecommerce. AWS continues to counter balance this sloth, with the unit's revenue growing over 33% to over $19.7 billion. AWS released as many as 200 products in the period, Amazon announced, bagging customers such as Delta Air Lines and Sweden's SKF as customers. 

Amazon CEO Andy Jassy contends the business is handling this flux well. “Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfilment network,” he stated in a media release. 

As consumers have returned to physical stores and events, with the pandemic easing Amazon's  juggernaut ecommerce business has slowed. Its online stores segment shrank 4%, even as physical stores' business continued to grow, up by 12% in this quarter. 

In terms of geographic presence, Amazon doesn't provide a granular breakdown. However, its international business' sales shrank by 12% and its operating profit of $362 million turned to a loss of $1.7 billion. The North America business grow by 10% on sales, but it too reported a loss—of $627 million.  

The company expects to post third-quarter revenue in the range of $125 and $130 billion, or a growth of 13% to 17%. 

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