For the first time, Amazon extracted its lucrative Amazon Web Services (AWS) business from its “Other” category, which traditionally included co-branded credit cards and advertising services.
When coupled with AWS, the category came in at about $1 billion each quarter. As it turns out, Amazon’s North American ads business brought in $187 million in Q1, a 22% increase over last year. International revenue was down 12% YOY to $47 million.
Although Amazon did not detail net revenues for the category for 2014, it seems Amazon’s advertising business could bring in about $1 billion a year on the high end, which is comparatively lower than Facebook’s ads business, which clocked $3.5 billion in one quarter to Google’s $17.3 billion. However, it’s not exactly an apples-to-apples comparison given Amazon’s core transactional business.
“We certainly include advertising as part of our North American consumer segments and we are making investments for the long term, which is reflected in our operating results,” said Amazon CFO Tom Szkutak during the earnings call Thursday.
Although Amazon is usually quiet about its ads-related business, it is decidedly more open about its push toward original content and video.
“What we’re doing globally to support our Prime platform, video and original content, devices, as well as some things related to international and some geographic-specific stuff, certainly we think there’s a big opportunity here,” said Szkutak in response to the lone analyst question about advertising investment on the call.
He noted a $1.3 billion investment in content for Prime customers, and credited original content and video as drivers of conversion in other parts of Amazon’s platform. He said Amazon acquires many new customers through a free trial pipeline on Amazon Prime Instant Video and many go on to convert into paying customers elsewhere.
Amazon reported a loss of $57 million in the quarter despite its increase in sales to $22.27 billion.
