Lisa Lacy
Oct 29, 2023

Amazon’s ad revenue jumped 25% in Q3 to surpass $12 billion

Plus, sponsored products, an ad-free Prime Video tier, a generative AI tool and more highlights from the quarterly earnings report.

Amazon’s ad revenue jumped 25% in Q3 to surpass $12 billion

Amazon’s worldwide revenue hit $143.1 billion in the third quarter of 2023, which was up 11% year over year (YOY).

Revenue derived from North America was $87.9 billion, which also marked an 11% increase from the year-ago quarter.

Here are the highlights from the earnings call:

Amazon Ads 

The platform’s advertising arm brought in just over $12 billion in the quarter, representing 13% growth from Q2 2023 and 25% YOY. 

During the company’s earnings call on Thursday, chief financial officer Brian Olsavsky attributed “durable growth” in ad revenue to its sponsored products offering specifically. 

Amazon partnered with media companies like BuzzFeed, Hearst Newspapers, Pinterest, Raptive and Ziff Davis in the quarter to display sponsored product ads on their apps and websites for products sold in Amazon’s U.S. store.

In addition, Olsavsky credited growth in its ad unit to the use of machine learning “to improve the relevancy of the ads we show our customers and enhance our measurement capabilities on behalf of advertisers.”

Prime Video

On the Prime Video front, chief executive Andy Jassy noted the streaming service is “often one of the top two drivers of customers signing up for Prime” as the platform continues to invest in exclusive content and expand its marketplace of channels.

With ads slated to come to the streaming service in 2024, he noted, “We aim to have meaningfully fewer ads than linear TV and other streaming TV providers.”

Prime Video’s forthcoming ad-free plan will be available in the U.S. for an additional $2.99 per month.

AWS

Revenue from Amazon’s cloud provider Amazon Web Services (AWS) was $23.1 billion in Q3, which was up 12% YOY — and Olsavsky said Amazon added $919 million in AWS revenue in the quarter.

This is in part thanks to the platform’s investments in generative AI, which it outlined in its Q2 update.

Jassy reiterated Amazon’s generative AI ambitions, which were bolstered in Q3 with a partnership with AI safety and research company Anthropic, which will collaborate with Amazon on training and inference technology.

Amazon also made Amazon Bedrock widely available in the quarter, a managed service that helps customers build generative AI applications.

“We're focused on doing what we've always done for customers — taking technology that can transform customer experiences and businesses, but they can be complex and expensive, and democratizing it for customers of all sizes and technical abilities,” Jassy said.

Amazon has also started integrating generative AI into its own operations, including e-commerce — where Jassy said generative AI helps consumers better discover products and helps Amazon itself better forecast warehouse inventory needs. 

The platform has also launched a generative AI image generation tool for its advertising customers. 

“All brands need to do is upload a product photo and description to quickly create unique lifestyle images that will help customers discover products they love,” Jassy added.

Fulfillment

Amazon echoed multiple themes from past earnings calls, including the “regionalization” of its U.S. fulfillment centers, or the move from a single national footprint to eight regional networks. 

Olsavsky noted Q3 2023 was only the second full quarter using the new logistics setup, which simplified its overall network.

Jassy noted one result from the change is customers get their orders faster. While he did not disclose specifics, he said Amazon is “on pace to deliver the fastest delivery speeds for Prime customers in our 29-year history.”

Another bright spot of the regional fulfillment network is the “significant growth” Amazon saw in purchases of consumables and other everyday products, including beauty, health and personal care items.

It has also resulted in increased purchase frequency, but Olsavsky did not quantify how much more frequently shoppers are ordering.

“Customers are getting items as quickly and conveniently as they are now from Amazon,” Jassy said. “They're going to consider us more frequently for more of their shopping needs.” 

Amazon Pharmacy

Finally, Jassy pointed to Amazon Pharmacy, which he said “has significantly evolved this year.” 

That includes 60-minute delivery of prescriptions via drone in Texas, as well as a partnership with insurance company Blue Shield of California to provide more affordable pharmacy care to nearly 5 million members starting in 2025.

“We remain convinced that we can be part of the solution making healthcare a better customer experience,” he added.

Source:
Campaign US

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